Selling? Do you understand the key auction terms?
You may have heard many of terms below, but you many not know what they mean.
Here is an overview of the main auction phrases:
1. Opening bids & bidding
After the auctioneer has run through the property being auctioned, detailed the features and an overview of the what is included with the property one last time, they will invite the buyers to put in an opening bid - or in other words for someone to place the first bid on the property. Other interested parties will then bid on the property in increments until either the property is sold or it is passed in (not sold).
2. Vendor's Bids
A vendor's bid is used to encourage bidding from buyers. Think of it as a momentum bid…..a bid to keep buyers interested, to keep the process flowing. This is placed by the auctioneer on the vendor's behalf to assist the property reaching its reserve price.
The amount of the bid needs to be below the reserve price and must be disclosed to all buyers in the interest of transparency.
3. Dummy Bids
A dummy bid on the other hand is a false bid made by a non-genuine buyer. All dummy bids are illegal and attract significant penalties for the vendor, the dummy bidder and in some cases the agent. Professional auctioneers will not engage in dummy bidding.
4. Bidding increments
This is the amount by which bids increase during an auction and is usually dictated by the auctioneer.
5. On the Market and Passed In
If the bidding does not reach the reserve price or a price the seller is happy with, the property may be passed in. In this case your agent will encourage interested parties to stay behind to negotiate a sale with the agent. Don’t panic, in my 12 years’ experience a sale is normally made soon after the auction.
If the bidding doesn’t reach the reserve price, the auctioneer will ask you if you are willing to adjust your reserve and sell the property for the highest price. If you are, the auctioneer will announce to the crowd that the property is on the market or in other words, that it will be sold to the highest bidder.
The final and usual scenario is when the bidding has reached the reserve price. The auctioneer will briefly stop the auction and confirm with the seller that they are happy to sell at that price. If they are the property will be sold to the highest bidder.
When you list your property for sale by auction, you still have the ability to accept pre-auction offers before the auction day deadline. All pre-auction offers need to be submitted in writing to your agent who in turn will present it to you for consideration.
However, in order for this to be rewarding, the offer needs to be solid and stand out to catch your attention. Otherwise, it may be a good plan to allow your property to go to auction and see what the market will give you for your home.