Buying at Auction 101

At Ray White Morrinsville, we believe auctions are the most transparent way to buy a home. You can see your competition, hear the bids, and know exactly where you stand in real-time.

However, because an auction contract is unconditional, you need to do your homework before the hammer falls. Here is everything you need to know to be “Auction Ready.”

1. The Golden Rule: Do Your Due Diligence First

When you win at auction, the contract is legally binding and cannot be subject to any conditions. You must complete these four steps before auction day:

• Finance Approval: Speak to your bank or broker. Ensure they have seen the specific property’s contract and that your “pre-approval” is valid for an auction purchase.
• Building Report: Arrange an appropriate professional inspection and understand its scope, exclusions and any further specialist advice needed.
• Legal Review: Send the Title and the Auction Agreement to your solicitor. They will check for easements, covenants, or any legal restrictions on the property.
• The LIM Report: The Land Information Memorandum (provided by Matamata-Piako District Council) tells you about the land’s history, drainage, and any permitted works.

2. Understanding the Terms

Before the auction starts, the agent will make the Terms and Conditions available. Key things to check:

• The Deposit: Usually 10% of the purchase price, payable immediately upon the fall of the hammer.
• Settlement Date: This is the day you pay the balance and move in. This date is set by the seller but can sometimes be negotiated before the auction starts.
• Chattels: Check the list of what stays with the house (e.g., dishwasher, heat pumps, light fittings).

3. What Happens on Auction Day?

The auctioneer will open the bidding. If the bidding reaches the Reserve Price (the minimum price the seller is willing to accept), the property is announced as “On the Market.”

• If it hits Reserve: The successful bidder enters the binding purchase contract. Ownership transfers through the settlement process.
• If it doesn’t hit Reserve: The property is “Passed In.” The agent may discuss next steps with interested buyers. Any negotiation priority depends on the auction terms and seller’s instructions; it is not an automatic right.

Pro Tip: Don’t be afraid to start the bidding! It shows you are a serious contender and helps you set the pace.

4. Can’t Be There in Person?

If you cannot attend the advertised auction venue, ask which bidding arrangements are available for that particular sale:

• Telephone Bidding: An agent can act as your “voice” over the phone.
• Proxy Bidding: You can authorize someone else to bid on your behalf.
• Online Bidding: Ask whether an online platform is available for the specific auction.
• Note: Confirm the required authorities, registration process and deadline with the agent well before the auction.

Frequently Asked Questions (FAQs)

Q: Is the “Reserve Price” the same as the “Rating Valuation (RV)”?
A: No. The RV is for council tax purposes and is often outdated. The Reserve is based on current market feedback and the seller’s expectations.

Q: Can I buy a house before the auction day?
A: Sometimes! If the seller is open to it, you can make a “Pre-Auction Offer.” If the offer is high enough, the auction may be brought forward.

Q: What if I’m a first-home buyer using KiwiSaver?
A: You may be able to buy at auction, but arrange finance and eligible KiwiSaver withdrawal timing with your lender, provider and lawyer before bidding. Make sure funds are available for both the auction deposit and settlement. Do not rely on the former HomeStart/First Home Grant, which is closed to new applications.