Auctions

Here are some tips to help you make sure that all parties have a clear understanding of the auction process and what to expect:

• Explain the auction process clearly to the vendor and any potential purchasers.
• Make sure they understand the terms used, for example, the reserve price, on the market, and vendor bid. This is especially important for anyone who has not been to an auction before, has never sold property by auction or for someone who has English as a second language.
• Check their understanding of what is going to happen at the auction (based on what you have told them). This will give you a chance to clear up any misunderstandings.
• Keep communicating and checking they understand what is happening throughout the auction process.
• Refer buyers and sellers to the information about buying by auction on settled.govt.nz(external link)

Vendors should understand that not every property will sell on the auction date. Some will sell before the auction and others may sell after.

You should have a conversation with them before the auction to discuss what the next steps should be if their property doesn’t sell on the day. This may help reduce stress on auction day, and your vendor will be reassured to know you have a plan in place.

A vendor bid is made by or on behalf of the vendor during an auction. It is usually made by the auctioneer to start the bidding, keep the bids moving, or to persuade buyers to raise their bids to get to the reserve price. There are rules about the use of vendor bids.

If the property is sold, both the buyer and the vendor will need to sign a sale and purchase agreement and confirm that the deposit has been paid. If either the buyer or vendor is absent or unable to sign the agreement, the auctioneer may be able to sign on their behalf.

What happens when bidding pauses?

If bidding pauses and the price isn’t acceptable to the vendor, the highest bidder may be given the opportunity to negotiate with the vendor and increase their bid. This negotiation is usually done in a side room, away from the auction floor.

You or the auctioneer may be representing the vendor in these negotiations. If the vendor agrees to lower their reserve to meet the top bid, make sure to confirm this in writing before the bid is taken back to the auction floor.

What happens when the property is passed in?

After a property is passed in, vendors are able to sell the property to anyone at a price they are willing to accept and with terms they agree on. It's a common misconception that, if the vendor negotiated with a particular bidder during the auction, that bidder gets priority to negotiate with the vendor after the auction.

A sale completed after the property is passed in at auction would normally be completed as a private treaty sale. However, it may still be sold by auction if someone who attended the auction submits an offer under the terms of the auction within one working day of the auction date.

If the property does not sell after the auction campaign, talk to your vendor about what your next campaign or marketing strategy might be. 

Here are some examples of complaints about auctions:

• The complainant, a potential purchaser, was the highest bidder at auction but the reserve had not been met. The auctioneer asked the complainant to step into a separate room. After a discussion, the complainant thought he had negotiated successfully and purchased the property. However, the auctioneer returned to the auction room and re-started the auction. The complainant did not understand the bidding would re-open after negotiations and was left feeling disappointed.
• The complainant was the vendor of a property being sold at auction. The property had not reached reserve, and the auctioneer asked the complainant whether the property was ‘on the market’. English was the complainant’s second language, and she did not understand the question. She said ‘yes', thinking the question meant ‘is the property for sale?’. The property then sold below the reserve price, leaving the complainant upset and with a lower sale price than she expected.
• The complainant was a first-home buyer and had never been to an auction before. She was confused to see a licensee from the vendor’s agency helping another bidder when no-one from the agency had offered to help her. The complainant felt the licensee was favouring the opposing bidder and considered this unfair.
• The most frequent complaint from vendors who have sold or attempted to sell their property by auction is that they felt pressured by the licensee to accept a lower price than their reserve price.