Auction Basics

Unlike the markets of NSW and Victoria, sale by auction is not the dominant method of selling property in most parts of Queensland. This has led to some misconceptions and even suspicion about auctions for many local sellers and buyers. So, we’ll run through the basics.

If a property is not sold by auction, then the method used is known as ‘sale by private treaty'. If the goal is to get a contract on a home, then both methods are equal. However, if the goal is to get the best possible price in the shortest possible time, then the auction is definitely the way to go.

Auctions establish a definite decision-making period for the buyer. If they want that property, they have to be prepared by auction day. They have to make a decision. Sale by a private treaty does not have a deadline, so buyers can take their time to make a decision. When the market is slow, this can add weeks, even months to the time taken to secure a contract. Typically, when a property goes to auction there will be about 4 to 5 weeks of advertising, then auction day and then a 30-day contract. Though it is possible to sell before the auction, shortening the time even further. This clear time frame will make planning so much easier for the seller – because they too are probably buying another home and moving.

We probably all know somebody who sold by private treaty only to have the contract ‘fall over’ because the buyer could not secure finance. Or perhaps were dissatisfied with the pest and building report. When that happens, the poor seller has to start from scratch.

This can’t happen with an auction as there are no conditions attached to the contract. The buyer cannot ask for time to organise finance or pest and building inspection etc. When that auction hammer falls, the buyer is legally committed to purchase the home. The contact automatically becomes unconditional. This delivers real peace of mind for the seller. Their deal will not fall over.

Auctions allow the seller to maintain control of the whole process. Just because a property goes up for auction, does not mean the seller is forced to sell at any price. On auction day, a ‘reserve price’ will be set. This is the minimum price for which the seller will put the home on the market. The reserve price will reflect the feedback potential buyers have given about the property during the campaign.

If bidding is slow at an auction in Queensland, the auctioneer is allowed to place ‘vendor bids’ up to the point where the bidding has reached the reserve. The auctioneer has to make it clear that it is a bid from the vendor so that everyone in the room knows where they stand. It is basically a way for the vendor, through the auctioneer, to tell the bidders ‘Look, you are going to have to raise your price because I’m not selling on that bid.”
This transparency underpins the whole auction process. Each person bidding knows who they are bidding against and what has been offered.

As it is going to be an unconditional contract, they are all on the same playing field.
There is a reason why sale by auction is the dominant method used in the two biggest real estate markets in Australia – Sydney and Melbourne. They work for both sellers and buyers – when conducted by an agent experienced in the process.