Auctions and private treaties

The main difference between buying a property by private treaty or at an auction is that auctions limit a buyer’s ability to negotiate.


Not all properties listed for auction actually sell at auction. Potential buyers should ask the agent if the vendor is considering pre-auction offers. If a pre-auction offer is accepted, the auction is cancelled.

You can appoint someone else to bid for you (e.g. a buyer’s advocate, a family member or friend) but do not arrange to have someone else sign the contract of sale on your behalf or rely on the nominee clause in the contract without first seeking legal advice.

Where there is more than one buyer, all buyers should be ready to sign the contract at the auction. If this is not possible, ask your solicitor to arrange a power of attorney.

Conduct at auctions

In July 2008, new legislation commenced that prevents bids being accepted after the fall of the hammer at house auctions in Victoria. This removes the dubious practice of a successful bidder being gazumped by a late bid.

Also, auctioneers are required to display the rules of the auction and to explain them to bidders before the auction begins.

Most auction contracts allow the vendor to place bids. It is common for the auctioneer to bid on behalf of the vendor. Recent reforms to this practice require the auctioneer to clearly disclose when a vendor’s bid is being made so other bidders know the source of the bid. The contract must permit this to be done.

It is also common for an auctioneer to halt an auction to consult the vendor in private. This can occur when bidding is slow at the start of an auction, or when there is a lull in the bidding, and the auctioneer thinks it is necessary to get further instructions from the vendor. The auctioneer then returns and advises the audience about these discussions. Normally, the bidding process resumes. It continues until the property is passed in or sold to the highest bidder.

The auctioneer announces when a property is “on the market” (i.e. when the bidding reaches the level at which the vendor will sell the property). When this announcement is made, the auctioneer sells the property to the highest bidder, and does not pass in the property.

In contrast, if the property is passed in, the vendor’s estate agent begins post-auction negotiations with the person who made the highest bid.

The auction contract

The contract of sale for a property being sold at auction must be prepared well before the auction.

Potential buyers should get legal advice about the contract and the vendor’s statement from their solicitor or conveyancer before the auction.

The agent will expect the successful bidder to sign the contract immediately after the auction is completed. The vendor should also sign at this time.

Once they have signed the contract, the buyer is legally bound. The buyer must pay the deposit upon signing the contract.

Cooling-off rights do not apply to auctions.

Private treaty or agreements

Many properties are sold by private treaty or agreement, which involves a buyer and a vendor signing a contract of sale. The contract must be accompanied by the vendor’s statement.

If negotiations between a vendor and a buyer become difficult and the buyer is keen to proceed with the purchase, the buyer can make a written offer to the vendor by signing the contract of sale, making a down payment for the deposit, and instructing the agent to communicate the offer to the vendor for acceptance or refusal within a specific time. The offer can be for less than the agent advises the vendor is willing to accept. The down payment is returned to the buyer if the offer is not accepted.

Cooling-off period

The advantage of a private treaty contract is that the buyer often has a right to withdraw from the contract during the cooling-off period.

If the land is residential, the buyer can end the contract during the three business days after the contract is signed and recover their deposit less $100 or 0.2 per cent of the purchase price, whichever is the higher amount.

This right is not available to a buyer who:

has entered into an earlier contract with the same vendor with substantially the same terms;

purchased within three business days on either side of the auction date;

is a selling agent.