What happens at an auction?

Once you've received pre-approval for your first home buyer loan and selected a home to make your own, you're armed and ready to take on the auction process. 

However, if you're a novice buyer, you're probably feeling a tad uncertain about the whole thing. You've never been at a home auction, so you know neither the process nor what the legal requirements are surrounding it. Consider this a helpful guide to make you a more confident bidder. 

The preliminaries

First of all, the auctioneer will typically introduce themselves, along with dispensing with the announcements she or he is legally required to say. After this comes a description of the property and its benefits, in order to get the crowd riled up. Keep in mind that the auctioneer works for the seller, and is trying to get the best price for them. 

This period can be a useful time in which to get yourself prepared, both mentally and otherwise. Just remember to bid on the right house!

Let the bidding begin

At this point the bidding starts. If there's no opening bid from the crowd, the auctioneer will begin with a vendor bid – or in other words, a bid put down by the auctioneer on the seller's behalf to help the property get to its reserve price. 

Once the bidding starts, there are two ways the auction can end. If the reserve is met, then the highest bidder wins and the house is sold. If it's not met, then the seller may look at private negotiations with the highest bidder. If these fall through, then the auctioneer may seek out other bidders to complete the sale instead. 

The aftermath

As the buyer, you'll sign the contract of sale and pay the deposit. Just keep in mind that if you win an auction, it's a done deal. You're legally entitled to settle the contract and won't be afforded a cooling-off period. If you've bid for something above what you had your home loan approved for, you may be in some hot water.