Auctions and Private Treaty

There are generally two ways to buy a property, by Auction or by Contract (a Private Treaty).

Buying at auction

Buying at auction can be a thrilling and satisfying process. But there are some things you should know before you start. We’ve put together some tips to help you through this exciting process :

• Firstly, and most importantly, make sure you have finance pre-approved. Consider obtaining your maximum borrowing power to enable you to bid to your maximum. Click here to see how much you can borrow.

• Secondly, be aware that if you are buying at auction there is no 48 hour cooling off period and no contract conditions (ie. subject to a satisfactory building inspection). We suggest you obtain a building inspection from a licensed building inspector before the auction.

• If you are successful at auction, you will need to sign a contract and pay generally 10% deposit at the fall of the hammer. At Eadon Home Loans, we suggest you discuss the terms of the auction prior to the day in relation to paying a lesser deposit, pending your circumstances and actual settlement date, normally 30 days.

• Do your research beforehand on the property in question. Obtaining a report of recent sales is a great starting tool.

• Set your price and always bid to your maximum.

• Keep cool - don’t get caught up in the emotion of the event.

• The auction will be guided by a reserve price, which is the minimum the owner (vendor) will accept. If the auction is advertised, “without reserve”, the highest bidder wins.

• Once the reserve price is met, the agent should officially announce the property is on the market. You now know the minimum price that the owner will accept.

• If the property does not meet the reserve, the agent will generally negotiate with the final bidder to raise the amount to the set reserve price or will push for the owner to reduce the reserve price to get a sale. Remember, if there is no sale, the agent won’t get a commission. They want to sell.

• At the auction, stand where others will see you and where you’ll have a good view of the other bidders. You then know who you’re up against, and you can make sure that the auctioneer is taking genuine bids.

• Call out your bid, don’t be afraid. A strong voice signals your intent to others.

• If you’re nervous, go to other auctions first to see how others handle themselves.

• Another tactic to use at an auction is to ask the auctioneer if the property is on the market. If the auctioneer acknowledges this question then the property will be sold to the highest bidder. If the auctioneer says no, wait until it is on the market before entering the bidding war.

• Marking your intentions early in an auction may scare others off by making substantial increases, however, we don’t believe it to be a successful way to run in an auction. 

• Another ploy adopted by auction goers is to wait until the bidding slows and then come in strong with strong bids to blow the others out of contention, keeping in mind your maximum bid.

• If the property gets passed in, then that means the reserve wasn’t met, don’t be afraid to re-negotiate with the agent the following day and make an offer subject to private treaty. If successful, you can negotiate contract conditions and have the benefit of a cooling off period. See below for more information on a Private Treaty.

Private Treaty or Contract

By purchasing a property through a contract you have the opportunity to set conditions, such as:

• Subject to a satisfactory building inspection
• Subject to finance
• Subject to sale of current home for no less than $---

Regardless of whether you buy from an agent (unless buying at auction) or an owner, we recommend getting a building inspection done on the property. There is nothing to stop you putting in an offer with this condition. Purchasing under private treaty also gives you a cooling off period of 48 hrs.