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.
A Private Treaty sale is where a property is listed with a purchase price and is not subject to an auction. It is up to the purchaser to negotiate a mutually acceptable price with the selling agent or vendor (owner of the property). When a price & the sale terms are agreed you are said to have “offer & acceptance” to buy the property. The purchaser is then usually given a short period of time in which to conduct “due diligence” (unless done prior to the offer), which includes checking of the Contract of Sale by a solicitor or conveyancer, conducting building and pest reports, and undertaking strata inspections (for apartment purchases). When the purchaser is satisfied it is time to sign a copy of the Contract of Sale and pay a deposit (usually 10%, but can be negotiated) for the property. The vendor also signs a copy of the Contract of Sale after which “exchange” occurs. This basically means forwarding the purchasers signed Contract of Sale to the vendor’s solicitor or conveyancer and the vendors signed Contract of Sale to the purchaser’s solicitor or conveyancer. Once this has occurred the property has been officially sold, and until this has occurred there is always a risk of gazumping taking place (where another purchaser offers a higher price for the property which is accepted by the selling agent or vendor).
There will usually be a cooling off period during which time the purchaser can effectively terminate the Contract of Sale. This is usually 5 days after contract exchange, but the purchaser must pay the vendor 0.25% of the agreed purchase price as a penalty. If the cooling off period is agreed to be waived at exchange then the solicitor/conveyancer must sign the 66W Certificate and attach it to the contract.
Settlement will usually occur 42 days (6 weeks) after exchange, but this is negotiable between the vendor and the purchaser. At settlement all remaining monies are required (ie, purchase price less deposit & other adjustments).It is important to take into account other “hidden” costs of purchasing a property which may be required prior to settlement, at settlement, or shortly afterwards.
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
If you want to buy a home, land or investment property you’ll have to sign a sale contract. The legal work involved in preparing the sale contract, mortgage and other related documents, is called conveyancing. It’s possible to do your own conveyancing, however, most people get a licensed conveyancer or solicitor to do the work for them.
Exchanging contracts and paying a deposit
Exchanging sale contracts is the legal part of buying a home. Before exchange, the agreement is usually just verbal and not binding. Up until you exchange contracts either you or the vendor have the right to change your minds.
After you have discussed the contract with your solicitor or licensed conveyancer and all the proper inquiries have been made, you will be ready to exchange contracts. There will be two copies of the sale contract: one for you and one for the vendor. You each sign one copy before they are swapped or ‘exchanged’. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. If the agent is handling the exchange, you must expressly authorise them to do so.
At the time of the exchange you will be required to pay a deposit, usually 10% of the purchase price. Following exchange, you have a financial interest in the property so it’s wise to get it insured.
Note: A contract has not been made and is not legally binding before the exchange of contracts and the payment of a 10% deposit.
When you buy a property in NSW there is a five business-day cooling-off period after you exchange contracts. During this period you have the option to get out of the contract as long as you give written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day.
A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
You can waive the cooling-off period by giving the seller a ‘66W certificate’. This is a certificate that complies with Section 66W of the Conveyancing Act 1919. The certificate needs to be signed by your solicitor or conveyancer.
If you use your cooling-off rights and withdraw from the contract during the five business-day period, you will have to pay the seller 0.25% of the purchase price. This works out to be $250 for every $100,000.
Sometimes, there are more buyers looking for homes than there are properties on the market. This is called a sellers’ market. In this case, you may want to organise a quick contract exchange. This way you can reduce the possibility of someone beating your offer and get your building and pest inspections done during the cooling-off period. You will still be able to back out if there is a problem. However, it is important to have the contract checked by your solicitor or conveyancer before you sign it.
It is possible to waive, reduce or extend the cooling-off period with the consent of the seller. If your solicitor or conveyancer has examined certificates from the appropriate authorities, a pest and building inspection has been done and your finance has been approved, then deciding to waive the cooling-off period could make your offer more attractive to the seller.
Settlement usually takes place about six weeks after contracts are exchanged. This is when you become the legal owner of the property. The balance of the purchase price and other adjustments are paid on this date.
From NSW Office of Fair Trading website www.fairtrading.nsw.gov.au
Win-win negotiation : Finding a fair compromise
Do you feel that someone is continually taking advantage of you? Do you seem to have to fight your corner aggressively, or ally with others, to win the resources you need? Or do you struggle to get what you want from people whose help you need, but over whom you have little direct authority? If so, you may need to brush up your win-win negotiation skills.
Effective negotiation helps you to resolve situations where what you want conflicts with what someone else wants. The aim of win-win negotiation is to find a solution that is acceptable to both parties, and leaves both parties feeling that they’ve won, in some way, after the event.
There are different styles of negotiation, depending on circumstances.
Where you do not expect to deal with people ever again and you do not need their goodwill, then it may be appropriate to “play hardball”, seeking to win a negotiation while the other person loses out. Many people go through this when they buy or sell a house – this is why house-buying can be such a confrontational and unpleasant experience.
Similarly, where there is a great deal at stake in a negotiation, then it may be appropriate to prepare in detail and legitimate “gamesmanship” to gain advantage. Anyone who has been involved with large sales negotiations will be familiar with this.
Neither of these approaches is usually much good for resolving disputes with people with whom you have an ongoing relationship: If one person plays hardball, then this disadvantages the other person – this may, quite fairly, lead to reprisal later. Similarly, using tricks and manipulation during a negotiation can undermine trust and damage teamwork. While a manipulative person may not get caught out if negotiation is infrequent, this is not the case when people work together routinely. Here, honesty and openness are almost always the best policies.
Preparing for a successful negotiation…
Depending on the scale of the disagreement, some preparation may be appropriate for conducting a successful negotiation.
For small disagreements, excessive preparation can be counter-productive because it takes time that is better used elsewhere. It can also be seen as manipulative because, just as it strengthens your position, it can weaken the other person’s.
However, if you need to resolve a major disagreement, then make sure you prepare thoroughly. Using our free worksheet, think through the following points before you start negotiating:
Goals: what do you want to get out of the negotiation? What do you think the other person wants?
Trades: What do you and the other person have that you can trade? What do you each have that the other wants? What are you each comfortable giving away?
Alternatives: if you don’t reach agreement with the other person, what alternatives do you have? Are these good or bad? How much does it matter if you do not reach agreement? Does failure to reach an agreement cut you out of future opportunities? And what alternatives might the other person have?
Relationships: what is the history of the relationship? Could or should this history impact the negotiation? Will there be any hidden issues that may influence the negotiation? How will you handle these?
Expected outcomes: what outcome will people be expecting from this negotiation? What has the outcome been in the past, and what precedents have been set?
The consequences: what are the consequences for you of winning or losing this negotiation? What are the consequences for the other person?
Power: who has what power in the relationship? Who controls resources? Who stands to lose the most if agreement isn’t reached? What power does the other person have to deliver what you hope for?
Possible solutions: based on all of the considerations, what possible compromises might there be?
Style is critical…
For a negotiation to be ‘win-win’, both parties should feel positive about the negotiation once it’s over. This helps people keep good working relationships afterwards. This governs the style of the negotiation – histrionics and displays of emotion are clearly inappropriate because they undermine the rational basis of the negotiation and because they bring a manipulative aspect to them.
Despite this, emotion can be an important subject of discussion because people’s emotional needs must fairly be met. If emotion is not discussed where it needs to be, then the agreement reached can be unsatisfactory and temporary. Be as detached as possible when discussing your own emotions – perhaps discuss them as if they belong to someone else.
The negotiation itself is a careful exploration of your position and the other person’s position, with the goal of finding a mutually acceptable compromise that gives you both as much of what you want as possible. People’s positions are rarely as fundamentally opposed as they may initially appear – the other person may have very different goals from the ones you expect!
In an ideal situation, you will find that the other person wants what you are prepared to trade, and that you are prepared to give what the other person wants.
If this is not the case and one person must give way, then it is fair for this person to try to negotiate some form of compensation for doing so – the scale of this compensation will often depend on the many of the factors we discussed above. Ultimately, both sides should feel comfortable with the final solution if the agreement is to be considered win-win.
Only consider win-lose negotiation if you don’t need to have an ongoing relationship with the other party as, having lost, they are unlikely to want to work with you again. Equally, you should expect that if they need to fulfill some part of a deal in which you have “won,” they may be uncooperative and legalistic about the way they do this.
Online auctions really click with bidders
Mari Gibson Domain Sunday Editor
April 11, 2009
Welcome to live auction webcasting.
PTY Auctions is the company behind the technology, which managing director Gavin Stuart says is a winner in today’s climate as it gets “every bidder in the room”, even if they are in Melbourne, London or Dubai. Mr Stuart says www.ptyauctions.com.au differs from most online auction sites because of its webcasting, which is used by several of Sydney’s big real estate agencies, including Century 21 and PRDnationwide. It has a database of 100,000 expatriate potential buyers.
Online bidding is another tool buyers can use to research and buy a property without having crossed its threshold. As well as virtually walking through homes via online videos, buyers can look at aerial views with Google Earth and check out the neighbours by going to maps.google.com.au and clicking on “street view”.
Century 21 Cordeau Marshall director Craig Marshall said online bidding replaced “the old days” of bidding at auction through a third party over the phone, and was convenient for time poor or nervous buyers.
Mr Stuart has held 500 webcast auctions since 2007. Bidders watch the auctioneer, and bids are displayed on their screens.
David Van Es and his wife, Suzie, sold their house in Wahroonga last year when an online buyer in Melbourne made the winning bid of $611,000 for their Havilah Avenue property.
Located in the Eastern suburbs, Double Bay is in the process of a resurgence, and is a suburb that Homesearch Solutions is tipping for relatively high capital growth prospects.
When Westfield opened in nearby Bondi Junction in late 2003, many of the shops subsequently went out of business in Double Bay and brought about a slump for the commercial profitability of the suburb, previously known by it’s nickname “Double Bay – Double Pay”. The closing of the Village Cinema and loss of public car parking areas further contributed to it’s general decline.
However over the past couple of years Double Bay has re-invented itself, particularly with it’s new unit residential developments such as the Stamford Cosmopolitan Centre in Knox Street, previously the Sir Stamford Hotel, which is due for completion in late 2009. In Cross St, the Ashington Group is proposing to re-develop the Stamford Plaza site with a new luxury residential & retail building.
On the other side of New South Head Rd, discussions continue between Woollahra Council and Woolworths about a low-rise development on the Kiaora Lands site.
Apart from the new developments, Double Bay is full of quality restaurants, hotels, cafes, shopping & other amenities, with a sophisticated village atmosphere. It sits directly between the two most expensive suburbs of Sydney, being Point Piper & Darling Point. It is linked to the city by ferry from the pier in Bay St, is on the major bus routes, and also the Eastern suburbs train line at nearby Edgecliff Station.
There are a variety of unit styles, ranging from simple 1970’s and art deco units starting at around $500,000 for a basic 1 or 2 bedroom places, through to over $10M for modern deluxe units with harbour views. Houses start at around $1.5M for a basic cottage or terrace through to very high premium waterfront houses worth tens of millions. Many of the houses are character Victorian & Federation, mixed in with more modern styles, particularly Tuscan.
What is a release of deposit clause?
Upon exchanging contracts on a property, the buyer is required to pay a deposit. This is usually 10% of the agreed sale price. The deposit is held in a trust account by the real estate agent until settlement takes place, usually 42 days later. This deposit acts as a form of guarantee that the purchaser will complete the sale and the vendor is entitled to keep this deposit if the purchaser pulls out. At settlement, the purchaser pays the balance remaining in return for the title for the property.
A release of deposit clause (or Section 27) can be inserted into the sale contract for a property, to enable the deposit paid to be released to the vendor after exchange of contracts (ie before settlement). This is usually requested by a vendor to enable them to then purchase and place a deposit on their new property but can sometimes be sought for alternative uses.
In the past most purchasers’ solicitors advised against this and sought to delete this clause. If a purchaser objects to early release of the deposit (and they need to state a reason for the objection), the vendor won’t be able to access the deposit until settlement.
Now days though the release of deposit clause is far more commonly accepted and with the rising property prices it in Sydney is often a necessity. It is in most cases a perfectly acceptable practice, as long as some safeguards are put in place to reduce risk. We recommend that you seek guidance from your solicitor or property conveyancer.