Purchasing property at auction in NSW can be both exciting and nerve-wracking, especially for first-time buyers. Unlike private treaty sales, auctions operate under different legal rules that buyers need to understand before raising their paddle. Let’s dive into the key legal aspects of buying property at auction, including the contract, deposit, and cooling-off period.
1. No Cooling-Off Period
One of the most critical differences between auctions and private treaty sales is that there is no cooling-off period. Once the auctioneer declares you the highest bidder, you are legally bound to proceed. If you change your mind, you could face serious financial penalties.
✅ Tip: Ensure you inspect the property and seek legal advice on the contract of sale before the big day.
2. The Contract of Sale
At auction, the property is sold on an “as is” basis, meaning you accept the terms in the contract without negotiation after the auction. The contract typically includes:
- The Contract of Sale, outlining the purchase price, deposit, and settlement terms.
- Any Special Conditions set by the seller.
- The Vendor’s Statement, which details property restrictions, zoning, title information and other important information.
Why Review It Early?
Some special conditions, such as "no building inspections allowed" or "short settlement periods," can have a major impact on your decision to bid.
3. Paying the Deposit
Be prepared to pay a non-refundable deposit—usually 10% of the purchase price—immediately after the auction. The deposit secures the property in your name.
✅ Tip: Have funds readily available on auction day to avoid any issues with payment.
4. Pre-Auction Due Diligence
Since you cannot back out once you win, it’s crucial to conduct thorough due diligence beforehand, including:
- Contra Review: Ensure that your lawyer has reviewed the contract of sale for any unfavourable terms.
- Building and Pest Inspections: Ensure the property is structurally sound.
- Strata Reports (if buying an apartment): Check for building defects and fees.
- Finance Approval: Have your loan pre-approved to meet settlement deadlines.
Neglecting these steps could lead to costly surprises after the auction.
5. Special Conditions and Negotiations
The contract of sale will include special conditions such as:
- Shortened or extended settlement periods (e.g., 30, 60, or 90 days)
- Requirements for the buyer to pay outstanding rates or levies at settlement
- Specific deposit payment methods or timelines
Reviewing these conditions with your legal representative is critical to avoid surprises and negotiate anything unfavourable before attending the auction.
6. What Happens After You Win the Auction?
Once you are declared the highest bidder, the process moves quickly. Here’s what happens immediately:
- Signing the Contract: You will be required to sign the contract of sale on the spot, formalizing the purchase.
- Paying the Deposit: A non-refundable deposit (usually 10% of the purchase price) must be paid immediately.
- Formal Acknowledgment: Both the buyer and seller will receive copies of the signed contract.
After these immediate steps, the settlement period will begin, and your solicitor or conveyancer will handle the rest of the legal requirements.
7. What If the Property Doesn’t Sell?
If the property doesn’t meet the seller’s reserve price and passes in, post-auction negotiations may occur. This could give you an opportunity to negotiate directly with the seller. In some cases, a cooling-off period may apply if agreed upon.
8. The Role of Your Legal Representative
Your solicitor or conveyancer will:
- Review the contract for unfavourable terms.
- Negotiate any amendments required to the contract terms.
- Ensure all inspections and due diligence are completed on time.
- Facilitate the smooth transfer of property ownership.
Conclusion: Be Prepared to Bid Confidently
With the right preparation and legal advice, auction day can be an exciting and rewarding experience. Don’t leave it to chance—let us review the contract, help you conduct thorough due diligence, and help you secure your next home with confidence. 🏡
Ready to bid at your next auction? Contact our team today for expert guidance.
