In recent weeks, auction clearance rates have been at levels not seen since the spring of 2007, so it is timely to offer some tips about the auction process.
Arrive in sufficient time beforehand for a final walk-through of the property and to allow you to check the contract, vendor’s statement, information about auctions and the auction rules, which will all be on display. Pay particular attention to the rules. They tell you how the auction will be conducted. One rule of which it is especially important to be aware: if the reserve is not met and the property is passed in.
If the auctioneer passes in the property below the reserve price, the owner will first negotiate with the highest bidder. If you have participated in the bidding, or have been sitting back watching how it is progressing, and the auctioneer announces the property is going to be passed in, it is a good strategy at this point to bid up to obtain the right to first negotiate with the owner. Securing the right to negotiate first does not cost anything and you have created a contract between yourself and the owner entitling you to negotiate before anyone else.
Your contract comes into existence the moment the auctioneer concludes the auction by passing in the property. Once the property’s passed in, it is too late to shout out a bid in an attempt to get to the front of the negotiating queue. The auction is over. You have missed out on securing the right to negotiate first. The auctioneer can’t re-open the auction to accommodate your late bid and override the right someone else has secured ahead of you.
