> Consumer advice  > Buying or selling a home  > Method of sale  > Sale by auction

Many properties are sold by auction especially when demand is high. The vendor will establish a reserve price that they are prepared to accept for the property. The reserve price will not be disclosed to you or the other bidders at auction. Ultimately, the bidders determine the price they are prepared to pay for the property. If bidding does not reach the reserve price, the vendor may decide not to sell the house. The vendor may then choose to negotiate a sale with any of the bidders or choose to put their home up for private sale on the open market.

If you hope to purchase a property at an auction you must be registered as a bidder - you do this by providing the agent conducting the auction with your details. You will need to show proof of your identity when you register. If you are bidding on behalf of someone else you are also required to provide information about that person and present evidence of that person's identity and a copy of a document signed by that person authorising you to bid on their behalf.

Dummy and vendor bidding
It is illegal for the vendor of the property, or a person acting on behalf of the vendor, to make a bid at the auction. This type of activity is called dummy bidding and can attract a maximum penalty of $20,000. The vendor of the property is, however, entitled to have up to three bids made on their behalf by the auctioneer, who must announce each such bid as a 'vendor bid'.

The amount of a vendor bid must be less than than the vendor's reserve price.

The vendor's statement or Form 1 must be available for inspection for at least three business days before the auction at the office of the auctioneer or the agent acting for the vendor. Both the vendor's statement and the standard conditions for auction must be made available for members of the public to see at the place where the auction will be conducted for at least 30 minutes before the auction is due to commence.

The auction is completed when, after giving those present sufficient opportunity to bid, the highest bid has been reached. The auctioneer has authority to accept the highest bid if it is at or above the reserve price. If that price is not reached, and the vendor does not wish to lower the reserve price, there is no sale and the property is 'passed in'.

Contract documents are normally signed and a deposit paid on the day of the auction. There is no cooling-off period when you buy at auction. If the property does not sell at auction but a person who made a bid, or on whose behalf a bid was made, enters into a sale contract on the same day as the auction, the contract is not subject to a cooling-off period.

The auction process can be very emotionally charged and if you are unsure about bidding at an auction, you should consult a specialist to act as your advisor.

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