Selling Your Property at Auction – What You Need to Know

When selling a residential property in Queensland, sellers may choose to sell their property by auction rather than by private treaty.

Understanding the auction process and what happens once the property is sold can help sellers understand what to expect and ensure they are prepared before the big day.

What happens before Auction Day?

Before a property goes to auction, the Form 2 Sellers Disclosure should be prepared to ensure it accurately reflects the property and the terms of the proposed sale, as these will need to be provided to the prospective buyers prior to the auction, allowing them to obtain legal advice and conduct their own due diligence prior.

The Contract should also be drafted prior to ensure all details relating to the property are correct.

For sellers, it is important that these documents are correct before auction day, as the Contract will form the basis of the sale if the property is successfully sold, so it is important that they are reviewed by your lawyer!

What happens on Auction Day?

On auction day, prospective buyers will have the opportunity to bid on the property.

If the property reaches the reserve price and the seller accepts the highest bid, the successful buyer will generally be required to sign the Contract and pay the deposit in accordance with the Contract, on that day

Once the Contract has been signed by both parties, the buyer and seller are legally bound by the terms of the Contract.

For sellers, this means that once the property is successfully sold at auction, they cannot simply accept another offer because another buyer subsequently offers a higher price, unless of course it does not sell by the bang of the hammer

What happens if the reserve price is not met or the Property is not sold at Auction?

If the reserve price is not reached, the property may not sell at auction.

This does not necessarily mean that the sale is over.

The seller may choose to negotiate with the highest bidder or another interested buyer following the auction.

If the parties agree on the price and terms of the sale, a Contract can then be entered into and the transaction can proceed towards settlement.

What does an Auction mean for Sellers?

For sellers, an auction can provide an opportunity to create competition between buyers and potentially achieve a favourable sale price.

However, sellers should ensure they understand the terms of the Contract before auction day, including their obligations and ensuring all details and disclosures made to the buyers are correct.

Once the property is successfully sold and the Contract is signed, the seller is bound by the Contract and must comply with their contractual obligations through to settlement.

What does an Auction mean for Buyers?

For buyers, purchasing a property at auction is different from purchasing by private treaty.

Generally, there is no statutory cooling-off period for a residential property purchased at auction and the contract is unconditional. Buyers should therefore conduct their due diligence, including obtaining legal advice and arranging any relevant inspections before auction day.

Buyers should also understand the terms of the Contract and order searches they want to look into for the property before bidding and ensure they have obtained relevant advice in relation to the purchasing entity prior to the auction day, as they will generally be required to proceed with the purchase if they are the successful bidder.

What Happens After the Auction?

Once the Contract has been signed, the sale proceeds in much the same way as any other residential property Contract in Queensland.

The buyer and seller must comply with their respective obligations under the Contract and prepare for settlement on the agreed Settlement Date.

The conveyancing process will then continue through to settlement, including attending to any relevant searches, which perhaps were not ordered before the contract was entered into, adjustments and settlement requirements.

Seeking Legal Advice

Whether you are selling your property by auction or private offer, it is important to understand the Contract, disclosure documents and your obligations before entering into a sale.

Obtaining legal advice can help you understand your rights and obligations, avoid costly mistakes and ensure you are prepared for the sale of your property.

If you have questions about selling your property by auction, or any other aspect of the Queensland residential property contract or conveyancing process, please do not hesitate to contact the property team at FC Lawyers.