Public auction advertising

In the state of Victoria, auction rules apply to all publicly listed auctions. From auctioneer discretion to no late bids, the list is lengthy.

But there is still a lot of confusion out there when it comes to defining an auction, versus a simulated auction, such as a ‘boardroom auction’. Buyers are often taken by surprise when it comes to cooling off periods, agent behaviours, vendor responses and processes that are triggered when pre-auction offers are made.

Not surprising, given most people may deal with only a few auctions in their lifetime.

A publicly listed auction is one that is publicly advertised with a date, time and venue, and for a notice period of no shorter than three business days.

Most auction campaigns we see are three to five weeks in timespan, (although COVID-19 has challenged everything in Melbourne this year). The rationale for a minimum of three business days relates to the limitations the cooling off period and the time required for buyer due diligence.

Public auctions do not offer a cooling off period.

In other words, buyers can’t change their mind about the purchase once a contract is executed.

Publicly scheduled auction campaigns are relatively straight forward and most buyers understand the routine. It’s when things change that buyer confusion starts to set in. For example;

1. A buyer triggers a pre-auction sale process,
2. An agent brings forward an already published auction date,
3. A private sale negotiation with competing buyers is resolved with a boardroom auction
4. An unsuccessful auction campaign has competing buyer interest in the days following the auction
5. An unsuccessful auction is rescheduled for a second auction
6. A private sale campaign reverts to an auction

All six scenarios are unique, and each must be considered based on their individual scenarios.

Let’s take #1 as a scenario. If the buyer has triggered a pre-auction sale process, the date of the contract signing is the critical measure. If the buyer’s contract is signed, (by them, not the vendor) outside of the final three business days leading up to the auction, they are not bound by the auction conditions and will have the right to cool off if they so desire. However if the resultant buyer signs a contract within the three business days leading up to the publicly advertised auction, they will be bound by auction conditions.

If a buyer was planning on finalising the due diligence and auction preparation by the eve of the auction, a competing buyer manoeuvre like this may bring their bidding strategy undone. We have foiled many a buyer’s plan to buy at auction when we’ve pounced on the Wednesday under the assumption that their finance may not yet be approved.

It always pays to be prepared for pre-auction offers.

If an agent chooses to bring forward an auction date, the buyers must be notified and the public advertising must be visible for at least three business days. Some would ask, “why would they do this?”. The typical reasons include;

• A vendor’s directive to sell at an earlier date (possibly because they have spotted a property they’d like to confidently bid on themselves to upgrade/downsize
• A forthcoming competing property that could de-rail or upset the campaign
• Strong buyer interest that the agents fear could diminish if not rounded up quickly
• The threat of rapidly approaching, difficult economic conditions or COVID-19 lockdown

The third example is the interesting one. A boardroom auction may be bound by auction conditions, yet again it may not. It boils down to the number of business days either side of the auction that the boardroom auction is held.

Some publicly advertised auctions themselves are held in agency boardrooms. Seems confusing? It’s all about the advertised date.

Likewise, if example four arises, the agents may choose to initiate a boardroom auction for a transparent process between post-auction buyers who are fighting it out. If the boardroom auction is held within three business days after the auction, the buyers are bound by auction conditions.

However, if three business days have passed, the process may feel like an auction, but auction conditions will not apply. The buyer will be entitled to their three day cooling off period. Its little wonder agents try very hard to have a failed Saturday auction offer wrapped up for their vendor by Wednesday evening.

A simulated auction is not necessarily the same as a publicly advertised auction.

And for examples five and six; again – it’s all about the publicly advertised auction date. The previous campaigns hold no relevance to the auction conditions once a date is set and the mandatory advertising period is applied.

And to throw another cooling off period fact out there – a buyer who has already cooled off on a property, or has entered into a previous contract and has rescinded is NOT eligible for a cooling off period if they re-sign a new contract for the same property.