How to bid at an auction

How to bid at an auction

When the house you want is going under the hammer, you'll need to be prepared. Auctions are the most popular method of selling property in New Zealand. Read OneRoof’s guide to bidding 101 before putting your hand up.

The mechanics of bidding

It’s a really good idea to go to as many open homes and auctions as you can beforehand to get the hang of how they work. Take an experienced person with you on the day, if you can.

“The first thing you need to do is to register your interest with the agent selling the property,” Belinda Moffat, chief executive of the Real Estate Authority, says. You can’t bid if you don’t do this. Sometimes there is a pre-auction offer and the auction date may be brought forward.

Other things to note about auctions are:

• They pit potential buyers against each other.

• The auctioneer runs the auction, and you can see/hear what other potential buyers are offering when they bid.

• Auctioneers work for the seller and they’re good at getting reluctant bidders to pay top dollar so do be prepared.

How you bid then depends if it’s in-person on auction day, or you’re bidding on the phone via a real estate agent or online, Moffat says. It's also important to observe auction etiquette, which we'll guide you through shortly.

Auction do’s and don’ts

Auctions are usually held in auction rooms or at the property. When the auction starts the auctioneer will suggest a price for opening bids. Some bidders will start immediately, but others may have a tactic of waiting until the bitter end to join in.

Typically, Moffat says, you’ll be given a numbered card that you can hold up when you want to bid. If not, you raise your hand. Or if you’re on the phone you will tell agent at the auction your bid and they will inform the auctioneer.

If one or more bidders start competing, the auctioneer will encourage them to raise their bids by a certain amount each time. If the bidding slows down the auctioneer will most likely let you offer smaller bid increments. “Every bid needs to be higher than the last,” Moffat says.

If the bids slow down, some agencies use what’s called vendor bids for vendors. The agents will bid on their behalf to help get the bidding moving or push it up nearer the reserve price. A vendor bid must be clearly identified. Vendor bids are not allowed after the property has reached the reserve price.

Once the auction has reached the reserve price, the auctioneer will say the words “on the market”, Moffatt says. After that point, the highest bid wins the property being sold.

What happens if you’re successful at a property auction

The property is sold at auction when the highest bidder is left, providing the reserve price has been met. The successful bidders then sign the sale and purchase agreements on the day and pay the deposit. The settlement date will be outlined in the conditions of sale document.

Other auction tips and tricks

Bidders may have tactics they use to psych out the opponents. That may be standing at the back of the room and watching the competition. It could be bidding early and hard. Or waiting until the bitter end to enter the bidding.

Always do your homework, Moffat says. Make sure you read all the paperwork and research the property before you attend the auction. “Most importantly, set your price limit and stick to your plan.”

“Auctions are really exciting, but they're fast-paced and they're stressful so it can be quite easy for people to be overwhelmed,” she says. “Buying at auction does requires a steady nerve.”

Online auctions

Thanks to Covid-19 and alert level concerns, online bidding and online auctions are becoming increasingly common. Real estate agents use auction software such as Gavl or video conferencing software to manage the auction process. Make sure you download the software beforehand and give it a trial run, Moffat says.

“Make sure you have a reliable internet connection (and) refresh your screen so you can see what bids are coming in.”

Reckon you're clued up on how to make an offer on a house now? Our first home buyers hub has information on what comes next, including signing sale and purchase agreements and making sure that you've got all the information you need to proceed.