Photo: REIQ of D. Tucker, Harcourts. 
It is not surprising that Australia leads the world in house sales by auction. As a sales method, auctions can generate exposure, achieving maximum marketing impact; competitive bidding means no price barrier; a sale at auction is unconditional and therefore definite; and inspections of the property are controlled through open house days or appointments.
Real Estate Institute of Queensland (RIEQ) managing director Dan Molloy said the most important aspect of any property transaction, including auctions, whether you’re selling or buying, is doing your homework.
The auction for sellers
From a seller’s viewpoint the auction process begins when the seller signs an appointment with an agency giving it permission to take the property to auction. Before signing an appointment, sellers agree on the marketing program and budget, which is the key to attracting a wide range of interested potential buyers, with the agent.
“Sellers should also take note of the agent’s credentials. Agents representing an REIQ accredited agency are bound by the institute’s Standards of Business Practice and sellers have the added security of knowing the agent can be subject to disciplinary action via the REIQ’s Real Estate Industry Professional Standards and Consumer Complaints Tribunal,” Mr Molloy said.
Once the listing appointment is signed, there are three key periods in the auction process.
The first is the period prior to the auction day when the marketing program is put into effect, advertising begins, and inspections or open house days take place. The REIQ recommends sellers discuss with their agent the best number of open homes and optimum time of day to present the property.
During this period, the agent will also prepare the contract of sale for the information of prospective buyers and for display on auction day. Next, is the auction day itself. At this stage the auctioneer will request written advice from the seller as to the reserve price. The reserve price will have been determined with help from a comparative market analysis provided by the agent. From this analysis a price range will have been established and a reserve price nominated.
If the highest bid reaches or exceeds the reserve price, the property is sold ‘under the hammer’ (i.e. at auction) and the Contract of Sale is signed immediately by the buyer and the seller.
Should bidding not reach the reserve price, the auctioneer may look to the seller for further instructions with regard to the reserve price, before ‘passing the property in’ (i.e. not selling under the hammer).
Following an auction where the property has not sold under the hammer, the real estate agent’s exclusive agency continues for the remainder of the agency period (up to 60 days) to achieve a private treaty sale.
“The real estate agent will follow up all enquiries made before and after the auction day and continue to promote and market the property, endeavouring to achieve a sale as soon as possible,” Mr Molloy said.
The auction for buyers
From a buyer’s point of view, open house days and inspections by appointment are the best time to make enquiries, get a copy of the Contract of Sale, take a good look around the house and clarify small particulars (such as is the dishwasher included in the sale, and in the case of a rental property, do fittings such as curtains belong to the tenant or the landlord?).
It is also the time when building and pest inspections should be conducted. A reminder though – inspections can only be held at the permission of the current owners and are done so at the buyer’s own cost.
Although inspections are an additional cost, the REIQ recommends buyers seriously consider obtaining inspection reports, as properties sold under the hammer are unconditional.
“It’s important to arrive early on auction day. This gives the buyer the chance to make sure there are no late changes to the contract and get themselves ready to bid. Government regulation requires all bidders show photo identification and register with the auctioneer before the auction begins. Registered bidders will then be given a bidder identifier, such as a paddle, to be used during the auction,” Mr Molloy said.
The auction will begin with the auctioneer reading the details of the property contained in the Contract of Sale and will also read the Conditions of Sale by auction. Then the auctioneer will call for bids.
Buyers should raise their paddle to make a bid, and call out a bid if they want to move a bid by larger or smaller amounts. A good tip is to stand where you have a good view of other bidders and the auctioneer.
It is important that buyers know their highest price range before the bidding commences and do not get carried away with the moment. If the buyer succeeds at auction they must be prepared to sign a Contract of Sale immediately, and put down the prescribed deposit.
If the reserve price has not been reached during the course of the bidding and the property is passed in for sale by negotiation, bidders may still be able to negotiate to buy the property.
If you’re thinking of buying or selling a property make sure you choose an REIQ accredited agency.
For a list of REIQ accredited agencies in your local area visit www.reiq.com.au or phone (07) 3249 7347.
