Many people have written that “Melbourne is the auction capital of the World”. Very few other places auction as many properties as we do here. It is a selling method that has developed over many generations of Real Estate professionals.
Auctions can be transparent and a very fair way to purchase property. You can see other people bidding and if the property is “On the Market” then the highest bidder has the right to make an offer to the vendor who will, under normal circumstances, accept. Does the Vendor have to agree to sell the property to the highest bidder – NO! Is the property SOLD when the auctioneer calls “Going once… Going twice… Going three times…. SOLD!
NO IT IS NOT!! The Instruments Act, section 126 very clearly states that no action can be brought against another person for a contract for the sale of land unless that agreement is in writing.
When you are the successful bidder you will usually be asked to enter the property and sign between 3 and 5 copies of the contract of sale. This will then be given to the vendor. As long as they sign then the property is sold. There are things that can go wrong. Firstly, someone else may communicate a higher offer to the vendor than yours. This can no longer come through the real estate agent as per rule 17 of the Estate Agents (Professional Conduct) Regulations 2008, however that does not stop any member of the public walking in or screaming out an offer. When you are invited in to sign contracts, make sure you can see the front door and if possible any other entrances. If anyone comes to the door, politely ask the agent to “get rid of them”
The second thing that can happen is the vendor changes their mind. You can follow this link to read my previous article “when auctions go bad” This actually happened at an auction in Melbourne a few years ago. Nine times out of ten, when the auctioneer yells sold, and you are the highest bidder, you will have a contract of sale within half an hour.
If the property passes in and you are the highest bidder, you have first right to treat at the vendors reserve. You do not have unlimited time to negotiate. You do not even have a right of “negotiation”. You have the sole right to agree to the vendors’ price. If you do, the agent will usually sell the property to you. If you do not agree to that price the vendor asks then negotiations will begin with you, as they will with any other interested party. As soon as you decline the agents offer at reserve, they have every right to seek other interested parties. If you wish to hold the right of first refusal for as long as possible, simply do not refuse their offer. If you pick your words very carefully, you can begin negotiations whilst never having said that you are declining their offer. This takes tremendous skill to do, but it can save you tens of thousands of dollars if you or your negotiator is good at it.
These are just a few issues you need to be aware of before trying to purchase a property at auction. Buying a property is usually the largest financial decision a person will make in their life. If you feel you need some assistance, please give us a call. Our first meeting is obligation free.
Ian James
Director JPP Buyer Advocates
