Reference
How to handle an auction: strategy, tactics and the rules
What the rules actually are, how bidding psychology is used against you, when to enter, and why the contract is unconditional the moment the hammer falls.
13 min read
An auction is not a sale format. It is a machine for producing competition, built by people who run it every weekend, aimed at people who will do it two or three times in their life. Understanding the machine is most of the advantage available to you.
The week before matters more than the day
Almost every auction is won or lost during the preceding week. On the day itself you are executing a plan; if you do not have one you are improvising in front of an audience against a professional.
- 1Get the contract and read it properly
This is the last moment it is possible. Special conditions, easements, the planning certificate, the strata minutes if it is an apartment. Anything you find afterwards is something you now own.
- 2Building and pest inspection, before you bid
Costly to do on a property you might not win, and far costlier to skip on one you do. Budget for inspecting two or three you do not end up buying.
- 3Unconditional finance, not pre-approval
Pre-approval is an indication. You need your lender to have valued this property and approved this loan. Lender valuations coming in below the hammer price is one of the most common ways auction purchases go wrong.
- 4Have your conveyancer review and, where possible, amend
Amendments before auction are sometimes accepted, especially on unusual special conditions. After the hammer they are impossible.
- 5Register to bid and read the state rules
Registration requirements, ID, and bidder numbers vary. So do the rules on vendor bids and co-owner bidding.
- 6Set your limit in writing and tell somebody
A limit you have said out loud to another person is much harder to abandon in the moment than one you only thought.
The theatre, and what it is for
Nothing at an auction is accidental. The crowd stands rather than sits. The auctioneer talks continuously. Bidding opens low to get momentum and moves in decreasing increments to keep it. All of it is designed to produce a slightly higher final number, and knowing that is most of the defence.
Vendor bids
The auctioneer may bid on the vendor's behalf to lift the price toward the reserve. It must be declared, but it is declared quickly and in the middle of a lot of other talking. If you are not listening for it you can spend several increments bidding against the vendor.
Dummy bidding
Bids by someone with no intention of buying, made to create momentum, are illegal in Australia. That does not mean it never happens. What it means is that you should bid on your numbers rather than on the apparent enthusiasm of a stranger.
The pause before the hammer
"Going once" is a device for extracting one more bid. The property is not going anywhere in that pause. If you are at your limit, the correct response is to do nothing at all.
Bidding tactics that hold up
- Bid confidently and quickly - hesitation reads as a buyer near their limit and invites another increment
- Bid in round, decisive amounts early to establish that you are serious
- Control the increments as it slows: offering $2,000 when the auctioneer wants $10,000 is legitimate and it changes the maths
- Watch the auctioneer, not the other bidders - the auctioneer knows where the reserve is and their behaviour changes at it
- Stand where you can see the room, not at the front where you can only see the auctioneer
- If it passes in below your limit, be the highest bidder - that is who gets to negotiate
Making a pre-auction offer
Often the strongest move available, and underused. It takes the competition out of the format the vendor chose specifically to create it.
- 1Make it strong enough to be taken seriously
A low pre-auction offer just becomes the opening bid on the day. It should be near what you would actually pay.
- 2Put a real deadline on it
Without one, the agent will hold it and use it. With one, the vendor has to make a decision rather than wait.
- 3Ask for the contract to be exchanged that day
The vendor's incentive to accept is certainty. Offer certainty explicitly - it is the thing you are actually selling.
- 4Expect the auction to be brought forward instead
This is the most common outcome and it is not a failure. You now know roughly where the vendor's number is.
If you win, and if you do not
Winning means signing the contract and paying the deposit immediately, normally ten per cent. There is no further checking, no finance clause, no second look. This is why the preparation is not optional.
Losing is a normal outcome and should be planned for. Most buyers attend several auctions before buying. The cost of the inspections and reports on properties you do not win is the price of not overpaying on the one you do, and it is a good trade.
Reading the pack in the time you actually have
The contract usually arrives a few days before the auction, and it is the one week where reading it properly is both essential and hardest to fit in. TrueBuy reads the whole pack and returns each finding with the quote and page, so you can get amendments requested before the day rather than discovering the problem after the hammer.
Read the contract before the hammer, not after
Upload the auction pack and get every finding quoted and paged, free while we are getting started. There is no cooling-off period to fall back on.
Common questions
Is there a cooling-off period after an auction?
No. Buying at auction means the contract is binding on the fall of the hammer, with no cooling-off period anywhere in Australia. This is the single most important fact about auctions and the reason all of your checking has to happen beforehand.
Can I make an offer before auction day?
Usually yes, and it is often the best move. A pre-auction offer that is strong and time-limited forces the vendor to decide without the competition an auction is designed to create. The vendor's agent will normally use your offer to bring the auction forward rather than accept it, so it needs a genuine deadline.
What is a vendor bid?
A bid made by the auctioneer on the vendor's behalf to move the price toward the reserve. It is legal in most Australian states but must be declared as a vendor bid when made, and there are limits on how many. It is not a competing buyer, and treating it as one is how people bid against nobody.
What happens if the property passes in?
If bidding does not reach the reserve, the property is passed in, and the highest bidder normally gets first right to negotiate with the vendor. Being the highest bidder at a pass-in is a genuinely good position, which is why bidding early has value even when you do not win outright.
Do I need my finance fully approved before I bid?
Yes. Unconditional approval, not pre-approval. There is no subject-to-finance condition at auction and no cooling-off, so if your lender's valuation comes in low after the hammer falls, that is your problem and your deposit at risk.
Where these figures come from
Grants, thresholds and duty rates change. Always check the current rules with the relevant state revenue office or Housing Australia before you rely on a number here.
Information, not legal advice. Confirm with your conveyancer before acting.