What is a real estate auction?
Selling a property at auction is a commonly used method of sale in New Zealand. The property is advertised with a date on which the sale will be held and the location of the auction. All potential purchasers can bid for the property at the auction.
What is the reserve price?
The vendor usually sets the reserve price prior to the auction. The reserve is the minimum ﬁgure that the auctioneer is instructed to sell the property for at the auction. Usually the reserve ﬁgure remains conﬁdential and is not disclosed to any purchasers.
How do I bid at the auction?
The auctioneer will ask for an opening bid and will then nominate the increments by which the bidding can be raised.
You can bid by either:
• Raising your hand.
• Calling out your bid.
• Nodding your head when you catch the auctioneer’s eye.
Can I purchase the property before the auction day?
If the property is advertised with (if not sold prior) in the marketing material, the vendor may consider offers for the property before the auction date. If the property is advertised as (will not sell prior) then the property will not be sold before the auction date.
Conditions of the Sale for the auction:
When you bid at an auction you must be in a “cash” position. You will need to complete any due diligence on the property prior to the auction.
A deposit equal to 10% of the purchase price is payable on the day by the purchaser if you are successful. This may be paid by way of: Bank cheque. Personal cheque. (If paying by personal cheque a special clearance on the funds will be sought on the ﬁrst business day after the auction) Electronic funds transfer immediately after the auction.
The vendor will nominate a settlement date on the “Terms & Conditions of Sale for Auction” a copy of this contract is available to all interested purchasers prior to the auction date. Should this settlement date not be suitable for you as a purchaser the vendor’s salesperson may be able to arrange a more suitable date with the vendor. This needs to be negotiated prior to the auction and documentation signed by the vendor in the form of a “side agreement”. This will state the date on which the settlement date will be, and a copy will be given to you before the auction. You are then able to bid at the auction on the basis that your settlement date is different for the standard auction terms of the sale.
Can someone else bid for me if I am unable to attend the auction?
Yes you can nominate someone else to bid on your behalf as long as suitable documentation has been completed before the auction date. Or you may bid by phone on the day which also requires documentation completed before the auction date.
What happens if I am the successful bidder at the auction?
Immediately after the auction, you will be required to sign the contract, and pay the deposit for the property.
What if the property doesn’t sell?
If the reserve price is not reached, the property is passed in to the highest bidder. The highest bidder is then offered the ﬁrst right to purchase the property immediately after the auction at the vendor’s reserve price. If a sale is not completed immediately following the auction, the property will be offered for sale to all other interested parties.
Before signing any agreements, both the buyer and vendor should seek legal advice.