Auctions and private treaties

29 Jan

Written By For Good Digital

Not all properties listed for auction sell at auction. Interested buyers should ask the agent if the vendor is considering pre-auction offers. If a pre-auction offer is accepted, the auction is cancelled. Buyers should be aware that contracts signed by a buyer within three clear business days of a publicly advertised auction still fall within auction rules, and cooling-off rights do not apply.
You can appoint someone else to bid for you (e.g. a buyer’s advocate, a family member or friend) but do not arrange to have someone else sign the contract on your behalf or rely on the nomination clause in the contract without first seeking legal advice.
Where there is more than one buyer, all buyers should be ready to sign the contract at the auction. If someone else is attending an auction on your behalf, ask your conveyancer or solicitor to arrange a non-enduring power of attorney (see Chapter 8.6: Understanding powers of attorney).
If you are attending an auction but your partner cannot and you want their name to be added to the contract later, your conveyancer or solicitor can prepare a nomination document. Note that some contracts include a nomination fee. Also, nominations usually need to be delivered to the vendor within a set time period (e.g. 14 days before settlement). If the nomination removes a buyer from the contract, the original buyer continues to be liable for the completion of the contract until settlement occurs.
Conduct at auctions
Bids cannot be accepted after the fall of the hammer at residential property auctions in Victoria. Auctioneers are required to display the rules of the auction and to explain them to bidders before the auction begins.
The auctioneer must clearly disclose when a vendor’s bid is being made so other bidders know the source of the bid.
It is also common for an auctioneer to pause an auction to consult the vendor in private for further instructions. The auctioneer then returns and advises the audience about these instructions. Normally, the bidding process resumes and continues until the property is passed in or sold to the highest bidder.
The auctioneer announces when a property is ‘on the market’ (i.e. when the bidding reaches the level at which the vendor will sell the property). When this announcement is made, the auctioneer sells the property to the highest bidder, and does not pass in the property. In contrast, if the property is passed in, the vendor’s estate agent then begins negotiations with the person who made the highest bid. Properties sold at auction are unconditional sales and cooling-off rights do not apply.
Many properties are sold by private treaty or agreement. The buyer can make a written offer to the vendor by signing the contract of sale, paying all or part of the deposit, and instructing the agent to communicate the offer to the vendor . The offer can be for less than the agent advises the vendor is willing to accept. The deposit paid is returned to the buyer if the offer is not accepted. Agents have different ways of conducting this process, including asking for ‘expressions of interest’ or asking all interested parties to put forward their best offer.
Cooling-off period
The advantage of a private treaty contract is that the buyer often has a right to withdraw from the contract during the cooling-off period. If the land is residential and the buyer is not a company, the buyer can end the contract during the three business days after the contract is signed and recover their deposit less $100 or 0.2 per cent of the purchase price, whichever is the higher amount. This right is not available to a buyer who:
- has entered into an earlier contract with the same vendor with substantially the same terms;
- purchased within three business days either side of a publicly advertised auction date;
- is the selling agent or company; or
- has bought a commercial or industrial property.