Property auctions have greater popularity in the southern states of Australia.
The auction sale market has always been active in New South Wales and Victoria compared with Queensland. Property in Queensland is usually sold with a price tag. Character places, however, tend to have a unique style or be inner city properties. Some real estate agencies feature prominently in the property auction space compared with other agents. Ray White and LJ Hooker come to mind.
So what are the rules of property auctions around Australia?
From experience in Queensland, Auction method sales were the primary focus for one reason; Higher in office commissions to the agent handling the auction as a percentage of the standard commission payable in Queensland at the time of 5% on the first $18,000 and 2.5% thereafter.
I am aware of agencies paying agents a sliding scale based on the auction being the highest commission to the agent, exclusive agency, sole agency paying lower amounts of in-house commission, with the lowest being an open listing given to the agent by the office. In a lot of cases the open listing to the real estate agent in some agencies is as little as 1/10th of the REIQ commission. These office structures of pay give a real incentive for the agent during a property presentation with vendors to walk out with an Auction agreement. In my books, governing bodies haven’t scrutinised disclosure in this area like other financial services have and what drives representatives an incentive to sell using one method over another.
Why auction? Well, there is a lot of incentive for agents to auction and in cases, not a lot of advantages for vendors to sell by auction.
Auctioneers are stacked in the agent’s favour. An auction agreement usually results in paid vendor advertising, marketing dollars for the agency and on auction day an unconditional contract usually around 30 days with waived cooling off periods.
Do you see why agents push auctions now?
In a lot of cases, auctions may not be the best method to sell as the property is effectively tied up in a campaign for weeks on end as the agent soaks up the advertising dollars. The agency is getting a good promotion out of it too, and I have seen some agents push buyers away by literally saying to “wait” until the auction day which can be a month away.
For buyers, I find that response annoying if you don’t want to wait around for a month for one property. In other cases, there is a risk of spending money on “due diligence” reports compared with other sale methods which will effectively take the property off the market while you do your investigations and spend money on professional expenses. Setting a date pushes a lot of (and often) unnecessary pressure on the buyers and sellers.
In Queensland, the price guide method with auctions was bought in and largely had a lot of suspicion around it. The guides are just that but in a lot of cases the auction figures on the day of sale are usually significantly different in some cases to the price guide values.
In some cases, low-balling on price guides was being done to gather in interest (draw crowds) for the auction, but authorities have been trying to crack down on this. There are penalties in Victoria for advertising properties at auction without price guides. Property agent price guides can’t be vague, and in NSW, unclear pricing can see the agency fined.
The real estate legislation is different in each state. Rules of one state jurisdiction differ in another state. There are things you can and can’t do in various Australian states when it comes to property auction rules.
So let’s look at the rules of property auctions across Australia.
There is a basic standard of rules that apply across the country in each state and territory.
Auctions are unconditional and second to getting money for paid advertising and a signed sale agreement from a vendor, agents just LOOOOoooove unconditional contracts. Unconditional contracts in real estate mean no cooling-off period.
Property Auction rules in Victoria
Then there’s the matter of Dummy Bidding. Dummy bidding is non-genuine attempts to increase the bidding and is illegal. When bidding reaches the vendor’s reserve level, then the property is on the market, and this is where I have seen a lot of games in Victoria in the late 2000’s when it comes to people yelling out “is it on the market yet” interrupting the auctioneer’s flow.
The highest bidder has the first right to negotiate if a property fails to reach the reserve price. Deposits are paid, and the contracts signed immediately after an auction sale. Agents just love HIGH DEPOSIT on a sale of 10% which covers their commission. That’s the only justification in asking for deposits of 10% is to get paid if a dispute happens. I have never in my property investing years paid an agent a down payment of 10% of the property purchase price. Vendor bids must be announced to the buyers.
Vendor bids must be announced to buyers.
The fines for underquoting by agents in Victoria are steep. Take for example an agency in Richmond, Victoria who was fined $330,000 for underquoting called Hocking Stewart
Queensland Property Auction Rules
Queensland has no cooling off period if a private treaty contract is entered into within 48 hours of a property being passed in at auction OR where the buyer was a registered bidder at the unsuccessful auction. Again, perfect for real estate agents.
It’s illegal for a vendor or agent to produce price guides for buyers, but if appearing on a real estate agents website for property searches as an advert, the advertisement if it comes up in the searches within a price range, the advertisement must include a statement that this is not a price guide.
On the day of the auction of the property, any buyer must register, and a numbered paddle is issued to bid at the auction.
This number is a unique identifier as only bidders that have registered on the day can offer on the day at the property auction.
Queensland Auctioneers must have an auctioneer’s licence; this is separate to a real estate agents licence. Having a real estate agent’s licence alone does not permit a property agent to conduct an auction.
Queensland rules say vendors do not have to set reserve pricing, if they do, property reserve pricing must be in writing before an auction. The auctioneer during the auction process doesn’t have to announce when the reserve has been met.
Auctioneers can accept vendor’s bids but only up to the reserve price set. It is illegal however for a vendor to offer any further than their vendor bids and these are termed “false bids”.
New South Wales Realestate Auction Rules.
The New South Wales (NSW) state government finally got tougher regarding under-quoting ahead of auctions. There were new laws that were passed that means an agent had to show evidence based documentation to support property appraisals. Well, whoopee. After many years of trying to increase the secrecy around property sales data, it does have merit that having access to property sales data can reduce the covering up of unscrupulous people in the industry who have data against those that don’t have data and rely on “advice”.
Agents cannot be vague in their advertising of properties for auction. For example having properties advertised with “offers over $500,000 can result in a penalty of $22,000 and more, the agent, upon being found guilty could lose commission fees on the underquoted sale property.
Dummy bidding is illegal across Australia. Amazingly. But does it still occur? I remember going to auctions in Queensland in a couple of decades ago and seeing office agents turn up in shorts and casual shirts. Don’t know if they were just curious and wanted to add to the crowd but it was well known then that even the birds and trees were offering up bids as the auctioneer let fire.
Times have moved on and like Queensland-New South Wales buyers at an auction must register to bid on the property.
Unlike Queensland above on vendor bidding, in New South Wales only one vendor bid can be made per property auction.
Property Auction Rules In Victoria
Property buyers making pre-auction offers in Victoria waive a cooling-off period if there is an acceptance of offer less than 72 hours before the scheduled auction.
In Victoria, buyers do not require to be pre-registered to bid on auction day. The auctioneer doing the auction does not require special (separate) auctioneers licence unlike Queensland does.
To be an auctioneer in Victoria means you need an agents’ representative certificate to call an auction.
Things are a lot more free flowing in Victoria, meaning without registrations, buyers can turn up on the day, place their hands in the air and there is zero restriction as to the vendor, vendor bidding. Unlimited vendor bidding compared with NSW and Australian Capital Territory auction rules which allow only ONE vendor bid.
Auction rules for South Australia
South Australian property buyers at auction need to preregister before the property goes to auction. Photo ID is also necessary to be shown by the bidders before sale.
Cooling off periods don’t apply in South Australia if a sale is made on the day of the auction, even if the sale of the property didn’t happen at the fall of the hammer.
A reserve price must be made in writing before the auction by the vendor in South Australia.
Western Australia Property Auctions.
Western Australians have another set of rules. Over in the west, vendors can make multiple bids on the property; it varied at the time of writing, but on reports, the number of vendor bids that can be done is ten, so please check with your agent.
When marketing a property, the agent is allowed to give no price guide estimates to prospective buyers; the agency can provide the buyers with a list of recent sales information, though. Your guess is as good as mine that there is an incentive there to print out the highest sales in the area given that the agents best interest is the vendor paying the commission and to make a sale.
Property sites like the Domain.com.au report – “However, if any price guide representation is made either verbally or in printed material, the reserve price must not at any time before or during the auction exceed 110 percent of the amount the vendor has expressed as an acceptable price in the agents’ authority to sell the property.”
“For example, if the vendor specifies $300,000 as the acceptable price, the reserve cannot be set greater than $330,000.”
In Western Australia, the auctioneer is required to read the particulars of the auction sale and the conditions as it relates to freehold property in the state.
Northern Territory Property Auction –
In the Northern Territory reserve price of the property is not revealed by the auctioneer.
In Western Australia, buyers do not have to register their intent when bidding for an option as was the case in Victoria and Northern Territory, as with other states, pre-auction contracts mean forgoing cooling off period.
Valid auctioneers licences are required and issued by the Northern Territory Department of Business.
In the Northern Territory, Reserve prices must be given before auction start. The auctioneer must not reveal, and vendor bidding has no limitations as long as there is disclosure of the bids to the buyers.
Tasmanian property auction rules
Preregistration is required before bidding at an auction in Tasmania. Vendor bidding is unlimited. The methodology of the auction system in Tasmania is similar to the mainland with the same unlimited vendor bidding allowed like Victoria and Northern Territory.
Complaints? Just remember if you go to a real estate industry representative body for a claim that you are talking to industry representatives hearing your case against one of their own.
Information can vary at any time. It is recommended that you contact your local Government department in respect of Auctioneer licencing in Victoria, Northern Territory, ACT, South Australia, Western Australia, Queensland or Tasmania or local realestate agents, Realestate Institute organisations such as:
Realestate Institute of Australia which is based in the ACT
Realestate Institute of Victoria – REIV
Realestate Institute of Queensland – REIQ
Realestate Institute of New South Wales
Realestate Institute of South Australia – REISA
Realestate Institute of Western Australia – REIWA
Realestate Institute of Tasmania – REIT