Auction Day Explained for Sellers: How Selling by Auction Works in Australia

Auction is one of the two main ways to sell residential property in Australia, alongside private treaty. An auction concentrates buyer demand into a single public event with a fixed deadline, which can work in a vendor's favour when there is genuine competition for the property.

This guide explains how an auction campaign runs through to auction day, the role the reserve and the auctioneer play, and what the key moments on the day actually mean for you as a seller. It is general information, and the specific rules differ by state.

How an Auction Campaign Runs to Auction Day

An auction campaign is a marketing program with a countdown built in. Most campaigns run for around four to six weeks, with the auction date set at the start so every interested buyer is working towards the same day.

During the campaign your agent markets the property, holds open inspections and records the level of buyer interest. This feedback is what informs the reserve discussion in the final days. A wider buyer pool tends to lift competition on the day, which is one reason distribution beyond your local area matters. A national network of buyers agents can introduce purchasers your local advertising would not reach.

In the days before the auction your agent will gauge how many buyers are likely to bid and at what level. That picture shapes the reserve you set.

Setting and Keeping the Reserve Confidential

The reserve is the minimum price you are willing to accept. Below the reserve the property cannot be sold under the hammer without your agreement, so it is the figure that protects you.

The reserve is confidential. It is set between you and your agent, usually in writing shortly before the auction, and it is not disclosed to bidders. Keeping it confidential is deliberate, because if buyers knew the figure they would simply bid to just under it.

You can adjust the reserve during the auction if the bidding and your agent's advice support a change. The reserve is your decision, not the auctioneer's, although the auctioneer will relay bids and seek your instructions at key points.

The Auctioneer's Role

The auctioneer runs the event on the day. Their job is to call the auction, take bids, set the bidding increments and drive competition between buyers in a fair and orderly way.

The auctioneer works for you through the selling agency, but they must conduct the auction within the rules that apply in your state. Those rules cover how bids are taken, what must be announced and how vendor bids are handled. Before the auction starts the auctioneer is generally required to read out a set of conditions to the assembled crowd.

The auctioneer cannot accept a bid below the current bid and cannot invent bidding from nowhere. Every genuine bid comes from a registered bidder.

Vendor Bids and the Rules Around Them

A vendor bid is a bid made by or on behalf of the seller, called by the auctioneer, used to help move the bidding towards the reserve. Vendor bids are permitted in many states but they are tightly regulated.

The common requirements are that vendor bids must be clearly and audibly announced as vendor bids at the time they are made, and that they can only be used while the property is still below the reserve. Once the property is on the market vendor bids generally stop. The number of vendor bids allowed and the exact disclosure wording vary. [Verify at the relevant state Consumer Affairs / Fair Trading body]

Dummy bidding, where bids are placed to inflate the price without being declared, is illegal everywhere in Australia. A declared vendor bid is lawful. An undeclared one is not.

What Happens When the Property Is On the Market

"On the market" means the bidding has reached or passed your reserve. At that point the property will be settled to the highest bidder, because you have agreed it can sell.

The auctioneer usually announces that the property is on the market, or words to that effect such as "we are selling". This is a signal to the crowd that hesitant buyers can no longer wait, because the next genuine bid could win the property. It often triggers a final round of competition.

From this moment vendor bids cease, and only genuine buyer bids count. When bidding stops, the auctioneer drops the hammer and the highest bidder has bought the property.

Passed In and the Highest Bidder's First Right

If the bidding does not reach your reserve, the property is "passed in". It has not been settled at the auction, and you are not obliged to accept the highest bid on the floor.

When a property is passed in the highest bidder usually has the first right to negotiate with the vendor. Your agent will take that bidder aside and try to bridge the gap between their bid and your reserve. Many properties that pass in are then settled within hours or days of the auction through this negotiation.

If no agreement is reached with the highest bidder, the property typically moves to a private treaty campaign and is offered to the wider market again.

The Unconditional Nature of an Auction Sale

A property bought under the hammer is generally sold unconditionally. The successful bidder signs the contract immediately and is bound, with no finance clause, no building and pest condition and, in most states, no cooling-off period for purchases made at auction. [Verify at the relevant state Consumer Affairs / Fair Trading body]

This is a significant advantage for a vendor. The buyer is expected to have done their inspections, arranged their finance and reviewed the contract before they raise their hand, so the sale carries far less risk of falling over than a conditional offer.

Because the buyer carries that risk, serious bidders do their due diligence during the campaign rather than after.

Deposit and Settlement

The successful bidder pays the deposit on the day, usually immediately after signing the contract. The deposit is commonly 10 per cent of the purchase price, though a different figure can be agreed in the contract before the auction.

Settlement then proceeds like any other sale, on the settlement period set in the contract. Once the balance is paid and the transaction is settled, ownership transfers to the buyer. The auction sets the price and binds the parties. Settlement completes it.

Auction Versus Private Treaty for a Vendor

Auction and private treaty suit different properties and different markets. The right choice depends on your property, your timeline and the level of competition your agent expects.

Auction can favour a vendor in these ways:

• A fixed deadline creates urgency and brings buyers to a decision point.
• Competitive bidding can push the price above what a single negotiated offer might reach.
• A sale under the hammer is usually unconditional, which lowers fall-over risk.
• There is no advertised asking price to anchor buyer expectations.

Auction carries trade-offs a vendor should weigh:

• Campaign and marketing costs are generally higher and are usually paid whether or not the property is settled.
• A property that passes in can signal weak demand to the market.
• Auctions perform best where there is genuine buyer competition, and can disappoint in a thin market.

Private treaty, by contrast, lists at an advertised price and sells through negotiation, often with a cooling-off period and conditional offers. It tends to suit properties where competition is harder to manufacture or where buyers need finance and inspection conditions.

The method matters less than the size of the buyer pool you reach. Widening distribution through a national network of buyers agents gives either method more competition to work with.

This article is general information only and is not personalised legal or financial advice. Auction rules, vendor bid requirements and cooling-off exclusions vary by state and territory. Confirm the rules that apply to your sale with your agent and the relevant state Consumer Affairs or Fair Trading body.