Bidding at auction is a nerve wracking experience for most people. We have helped hundreds of our clients successfully purchase at auction and have put together a list of useful tips and strategies to ease the stress and help you feel confident bidding on auction day.
Underquoting Real Estate
Written by Sean Nicholls for the Sydney Morning Herald on 4 September 2015
In moves to stop underquoting real estate, agents will be forced to nominate a property’s estimated sale price and adhere to that figure in advertising or face losing up to tens of thousands of dollars in fees and commissions.
The estimated selling price will be set in a formal agreement between the seller and the agent as part of a NSW government crackdown on the practice of under-quoting.
Advertisements containing the phrases “offers over” or “offers above” or any similar phrase will also be prohibited, and a hotline will be established for complaints.
The new rules are contained in amendments to the Property Stock and Business Agents Act due to be introduced to parliament next week as the spring property market gets under way.
The Minister for Better Regulation, Victor Dominello, said the new laws – which fulfil an election promise – would provide “clarity” for agents, sellers and buyers and strengthen consumer protection. “Under-quoting is illegal and misleads potential buyers looking for their dream home,” he said. “This legislation will help NSW Fair Trading identify and catch the rats in the ranks.”
The Department of Fair Trading defines under-quoting as making “a statement in the course of advertising a residential property for sale that is less than the agent’s true estimated selling price as recorded on the agency agreement”.
Fines of up to $22,000 already apply to agents who deliberately “falsely understate the estimated selling price” of a property. Only one under-quoting prosecution is now under way, against Bresic Whitney in Darlinghurst. There have been no successful prosecutions under the current act.
Data released by Mr Dominello’s office shows 263 complaints about under-quoting were lodged against agents in the past two financial years.
The most complained about areas were Castle Hill with 18 complaints, Epping with 14 and Neutral Bay with 13.
The small numbers are believed to be a consequence of consumers not being aware of what constitutes under-quoting and therefore not contacting Fair Trading.
Malcolm Gunning, president of the Real Estate Institute of NSW, said the government had consulted the industry to ensure the new rules would be “clear and, we think, effective”.
Written by Sean Nicholls for the Sydney Morning Herald on 4 September 2015
Auction Procedures and Powers of Attorney
The alternative to Private Treaty is sale by Auction. This is where a property is offered for sale to the highest bidder on Auction Day. The property will usually be open for inspection for around 3-4 weeks before auction day. It is important that all due diligence (ie. Checking the contract, building and pest inspections, strata reports etc) be carried out before the auction day, as unlike Private Treaty, once the hammer falls, the property is sold and there is no cooling off period. A deposit, usually 10% is payable after the auction at the time of signing the Contract of Sale.
If a property passes in at auction and you are the highest bidder, you normally have the first right of negotiation with the vendor (or agent).
It is also possible to buy a property prior to auction, simply by getting “Offer & Acceptance” and following the due diligence procedures as shown above in Purchasing by Private Treaty. After successful exchange the property auction will then be cancelled. Remember also that there is no cooling off period if you buy pre-auction.
Auction Bidding Register & Confidentiality Issues
There were substantial changes brought about in relation to dummy bidding & auction bidding registers by the reformed Property Stock & Business Agents Act (2002).
These New South Wales laws now allow for only one dummy (vendor) bid at a property auction, which must be announced when made, and in practice is usually done by the auctioneer. When introduced there were fears that instead of the selling agent’s past practice of employing professional dummy bidders to go from auction to auction, vendors would continue to have family, friends & associates to do the dummy bidding for them, as they also have in the past. However the Australian Competition & Consumer Commission (ACCC) has since stepped in and added weight to banning the practice of dummy bidding across Australia, by promising fines of up to $1.2 Million for real estate companies, and up to $220,000 for vendors and individuals. The combination of these laws appear to have made a marked difference to the performance of auctions.
A major concern from buyers about the new Bidding Register is that of confidentiality. Regardless of the Privacy Act regulations prohibiting selling agents from using the register information for future marketing, they will have records in their office of the auctions that a buyer has attended, and therefore a clear idea of their budget and other information.
One way around having your name disclosed on the bidding register is to employ a Homesearch Solutions to do the bidding on your behalf, by giving us a strictly limited Power of Attorney. Under these circumstances we will only have to put our name on the register and not the actual buyer’s, which will maintain confidentiality.
The terms of the Power of Attorney can be as specific and limited as the buyer wants, such as keeping it to a particular property on a set date, and also be subject to a separate letter which states the bidding limit.
People that may be inclined to use this system are: buyers who have made rejected pre-auction offers and who want to remain anonymous to the selling agent at the auction, high profile community members, those intimidated by the auction room, and also people concerned about selling agents having access to the register.
Residential and rural property auctions
You will not be able to bid at an auction of residential and rural property in NSW unless you give the selling agent your name and address and show proof of your identity. Your details will be recorded by the agent in the Bidders Record and at the auction you will be given a bidder’s number. Registering for an auction does not mean you must bid. Registering simply gives you the right to bid.
Who needs to register?
If you are bidding to buy the property jointly with another person, for example, a spouse or partner, only one of you needs to register.
You need to register if you are bidding for another person or a company, and you need to show the agent a letter of authority from them, authorising you to bid on their behalf. This also applies if you are bidding on behalf of someone on the telephone.
If you are bidding for another person the letter of authority must include the person’s name, address and the number on their proof of identity (eg. driver’s licence).
If you are bidding for a company the letter of authority must be on the company letterhead and the ABN will be recorded in the Bidders Record as the company’s proof of identity.
Proof of identity
To register, you must present a card or document issued by government or a financial institution, that shows your name and address, for example:
driver’s licence or learner’s permit
vehicle registration paper
council rates notice.
If you do not have this kind of proof of identity, you can use two documents that together show your name and address.
One must show your name and be issued by a government or financial institution, for example:
credit card or store card
The other must show your address, for example:
utilities bill (eg. gas, electricity, telephone)
real estate rental agreement
statutory declaration stating your address.
When to register
You can register with the selling agent at any time prior to the auction, such as when you inspect the property, or on the day itself.
If you pre-register, you will still need to show the agent your proof of identity on auction day. The agent will then give you your bidder’s number.
What happens at registration
The agent will write your name, address and the number of your proof of identity in the Bidders Record and, if you are bidding for someone else or a company, their name, address and proof of identity details. The agent will then give you your bidder’s number, which must be displayed when you bid.
What if I arrive at the auction late?
If you arrive after the auction has started and wish to bid, you will need to quickly find the agent and register or present your proof of identity, if you have pre-registered.
If you need to make a bid immediately, hold up your hand to let the auctioneer know you are going to make a bid after you have registered.
As soon as you have a bidder’s number, the auctioneer can accept your bids. Return your bidder’s number to the agent after the auction.
The agent is not permitted to show the Bidders Record to anyone, including the property owner. Only an authorised person from the Office of Fair Trading is permitted to see the Bidders Record.
The agent must store the Bidders Record securely and cannot use it for any purpose.
This auction is being conducted under certain conditions that are set by law.
The auctioneer will have these conditions on display before the auction so that you can read them. The auction conditions include:
the highest bidder is the purchaser, subject to any reserve price
the auctioneer is entitled to make one bid only on behalf of the seller
before the auction, the auctioneer must announce that the auctioneer is permitted to make one bid on behalf of the seller
the auctioneer must announce immediately before, or in the process of making the bid, that he/she is making a vendor bid
the auctioneer can refuse a bid that is not in the interests of the seller
the auctioneer has no authority to accept a late bid, that is, a bid after the fall of the hammer
if there is a disputed bid, the auctioneer is the sole arbitrator and makes the final decision
the successful buyer’s name must be given to the auctioneer as soon as possible.
If you are the successful bidder, you must sign the sale contract and pay a deposit on the spot, usually ten per cent of the purchase price. There is no cooling-off period when you buy at auction.
After the exchange of contracts, your solicitor or conveyancer will carry out various searches on the property. Your solicitor and the seller’s legal representative will then arrange for settlement at which time you must pay the balance of the purchase price.
Dummy bidding and collusion
It is illegal to make dummy bids at an auction.
The seller of the property is entitled to have one bid made on their behalf by the auctioneer. When the seller’s bid is made the auctioneer must announce it as a vendor bid.
If you make dummy bids for the seller, you may be prosecuted and fined up to $55,000. The property seller who asked you to bid can also be fined up to $55,000, as can the agent and the auctioneer if they were involved in the arrangement.
It is an offence to collude with someone to interfere with free and open competition at the auction. This offence carries a maximum fine of $55,000.
Co-owners and executors
A co-owner, executor or administrator or someone bidding on their behalf, may make more than one bid to purchase the property as long as:
this is outlined in the auction conditions
the auctioneer has announced this before the start of bidding at the auction
the auctioneer announces before the start of the auction, the bidder registration number of any co-owner, executor, administrator, or someone bidding on their behalf.
From NSW Office of Fair Trading Website www.fairtrading.nsw.gov.au