8 must know terms if you're buying at auction
Auctions can be fast-paced with bids flying to and fro. Increase your chance of buying your dream home at auction by understanding these key auction terms.
Auctions can be a huge thrill ride, no matter what side of the transaction you are on - but you want to be able to keep up with what is going on! Auctions can be fast-paced with bids flying to and fro - by getting clued up on these key auction tips, you will soon be able to bid it out with the best on the block.
The bidder's guide is a document that must be provided to bidders by the selling agent before an auction. It gives information on how to register for auction and what paperwork needs to be filled out, the relevant privacy laws and the rules and regulations of the auction. Make sure to get one of these before you start to seriously plan out your bidding!
Usually beginning about half an hour before an auction, the inspection period is important for anyone seriously considering getting in on a property at auction. It isn't just a final chance to see the property up close, it is also an opportunity to get a final look at the relevant documents for the home, such as the terms of settlement - as Consumer Affairs Victoria (CAV) says, you won't be able to change these if you win the auction.
One of the most crucial terms, the reserve is effectively the point at which the auction becomes "live". If bidding does not go over the reserve then the property generally does not sell. However, once bidding goes over a reserve price the property is on the market and a winning bid is binding, so make sure you don't over-extend your budget or get carried away in the heat of the moment - in some states there is no cooling-off period, which is a set amount of time in which you can back out of a deal.
Rises and Advances
This is the amount by which bids increase during an auction, and according to CAV are usually dictated by the auctioneer. They could be $500 or $5000, and do not necessarily have to be adhered to - but the auctioneer can reject your bid if they think you have not advanced the bidding by enough.
Vendor & Dummy Bids
It's important to understand the term vendor bid and the difference between it and dummy bids.
Vendor bids are a single bid made by the auctioneer on behalf of the seller. The purpose of this bid is to help the property achieve its reserve price.
The auctioneer is entitled to bid once on behalf of the seller. If this bid is to be made during the auction, the arrangements for making the bid must be set out in the rule displayed before the auctions starts and the intention to make a bid should be announced by the auctioneer at the start of the auction.
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 if it can be proved they solicited the bid.
On The Market & Passed In
During the course of the auction, the auctioneer may stop the proceedings and say they are seeking advice or instruction from the vendor. This gives the auctioneer time to discuss the progress of bidding with the vendor.
If the bidding has reached the reserve price, or is close, the auctioneer will ask the seller if they are willing to sell the property for the highest price. If they are, the auctioneer will announce to the crowd that the property is on the market or rather that it will be sold to the highest bidder.
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 the highest bidder would be given the first opportunity to negotiate a sale with the seller.
There is a lot to take in at the auction yard, and one of the best ways to learn the ropes is to get down and see some auctions yourself. You could contact a local real estate agent to find out where the next one is happening in your area to get in and get researching!