Selling by Auction

Auctions have become a very popular method of selling real estate in Auckland. Here we explore the process and its advantages and disadvantages for the Vendor...

The auction process can be split into 3 stages:

Stage one: Occurring before the auction, this stage consists of an intensive three to four week marketing programme, which usually encompasses a combination of print and internet advertising. The aim here is to capture the attention of all the potential buyers that are currently in the market for that type of property.  Buyers are generally savvy and do their homework, researching what else is out there and gaining a good idea of value.

On some occasions, a vendor might get a pre-auction offer from one or more of the parties who has inspected their property.  Depending on the level of the offer, and how far out from the auction day the offer comes in, the vendor can consider whether they would be willing to accept, or whether they want to wait until auction day.  If the offer is at a level that the vendor is willing to accept, the agent then informs all other interested parties and asks if, they too, would like to make an offer. At this point, the process becomes more like a tender.

Stage two: Assuming the property hasn't already sold, this stage comprises of the auction day itself. All things going well there will be a number of people willing and able to bid on the property. Based on the feedback the agent has received, the vendor will be able to set a suitable reserve with the auctioneer (a price under which the property will not be allowed to sell).
Note: The use of dummy bidders is illegal in New Zealand, however the Auctioneer may make bids on the vendor's behalf, provided he makes it clear that the bid is a vendor’s bid.

All going well, the competition between bidders drives the price up past the reserve and, at this stage, the Auctioneer will advise the crowd that the bidding has met reserve, meaning the property is now on the market and will be sold to the highest bidder. On the fall of the hammer, the highest bidder will be required to sign the auction agreement and pay a 10% deposit into the agent’s trust account.

Sometimes the bidding doesn't reach the reserve.  If it is close, but not quite there, the Auctioneer may stop the auction and talk to the vendor about whether they want to adjust the reserve. By doing this it could mean the property is officially ‘on the market’ which may bring in new bidders.  If this is not the case, the highest bidder has the first right to negotiate with the vendor.  If no agreement is reached, the process then moves onto stage three.

Stage three: Taking place after the auction, this stage provides the vendor with the option of putting an asking price on the property or negotiating with other parties.

The advantages and possible disadvantages of the auction process for vendors


  • The vendor has control of the process
  • Any sale during stage one or two is an unconditional, cash sale
  • The vendor sets the terms and conditions of the sale (eg: settlement date, 10% deposit)
  • The sale is unconditional and motivated buyers have done their due diligence, sought legal advice etc.
  • Competition between buyers can drive a good sale price for the vendor
  • If all goes well, the property is only on the market for three to four weeks (less hassle with open homes and viewings)
  • The process is transparent


Possible disadvantages:         

  • The process is public so everybody knows what the property sold (or didn't sell) for 
  • You can end up with potentially less bidders for the property as only cash, unconditional people will usually bid on auction day
  • For best results, an auction usually needs at least two keen bidders competing for the property
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