Although it can be incredibly disappointing if you’re the seller, knowing what to do next after an auction is passed in can make or break your property sale.
For the unfamiliar, a real estate auction is a public sale of a property usually conducted by an estate agent acting as an auctioneer, and is governed by strict rules. The auction is advertised for a specific place, time and date, with inspections permitted prior to auction day.
How the process works is that prospective buyers bid and the property is offered to the highest bidder at the seller’s discretion, which is usually why vendors opt to sell their home via this method in the first place.
For both buyers and sellers, auctions can be nerve wracking and yet thrilling experiences. However, it can all quickly fall apart if the auction is passed in, and can be nothing short of heart wrenching for a vendor who’s already put in months of work – but what happens next?
How To Proceed If An Auction Is Passed In
In Australia, an auction is a single event, as opposed to a private sale treaty which is an ongoing process. There is usually a reserve price that the vendors will have in place for any property auctions, which is essentially the minimum price that they will sell the home for. If nobody bids high enough to meet the reserve price, then the auction is passed in.
If you purchase a property that has been offered for sale by public auction either at the auction or within three clear business days before or after the auction, there is no cooling off period. This is arguably one of the biggest factors to consider when buying at auction in Victoria, as the process is very much an ‘all in vs nothing’ type approach – once you buy, you’re locked into the deal.
Although there’s no concrete proof, it’s this risk factor that may be influencing the lower clearance rates that Sydney and Melbourne are currently experiencing. With the property market beginning to cool down, buyers aren’t as driven by “FOMO” – or Fear Of Missing Out – as they once were.
As such, conservative behaviour from buyers is not generally welcomed by auctioneers, especially considering that almost a third of properties are currently failing to sell under the hammer, and are being passed in at auction. More often than not, this is because the reserve price is higher than market expectations, or what bidders are willing to pay for the property.
However, this doesn’t mean that all hope is lost. When a property passes in, the highest bidder has the first right to negotiate a price in private, with the agent negotiating on the vendor’s behalf. This may result in the bidder offering more money, the vendor accepting less money, or more often than not – the two parties meeting somewhere in the middle.
If a price can’t be agreed upon, the agent may open up negotiations with other buyers. The vendor may also choose to walk away and privately list the property if there’s no time restrictions on a sale, or instead reevaluate their property plan to see what the best path forward looks like.
It’s also worth noting that there’s been a growing trend linked to lowering the reserve price mid auction. If interest in a property is strong enough, it can help to kickstart interest in the dwelling all over again, and drive bidders to secure a perceived bargain right then and there.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.