Passing in at auction. What does it mean? And what should you do?
Attending an auction is nerve racking enough as it is, without knowing what the property is going to sell for and who your competitors are. But what if there is a big gap between what the top bidder wants to pay and what the property owner wants to sell for? Often the property is passed in and I'm about to explain exactly that means.
What is passing in at auction?
This is when the top bid at an auction does not meet the sellers reserve price or the lowest price they are willing to sell the property for.
What happens next?
In most cases, the highest bidder has the first right to buy at the vendors reserve price once this is disclosed. The agent will often bring the highest bidder into the home to talk privately and see if the sale can be negotiated. If the highest bidder declines to proceed at this reserve prize, then it is often opened up for all to participate and make an offer.
The highest bidder and the property owner selling have a chat about the price and try to negotiate. This is usually done in private. If you are next in line from the top bid, don't worry. If the top bidder and the seller can't come to an agreement on the property, than you may have a chance to put an offer forward. If your offer is accepted, normal auction rules apply where contracts are exchanged on that day and there is no cooling off period. A deposit will also be required.
Top tips for buying at auction and making the most of a passed in property.
- If you like a property that is scheduled to go to auction, always register your interest with the agent to let them know that you are interested in the property and to keep you up to date should the vendor decide to sell the property prior. There is nothing worse attending an auction you intended to bid on that already has a sold sticker! Sometimes a vendor can say that they are willing to go to auction and a few weeks later change their mind and sell prior so keep this in mind.
- Often an auction may have a buyers guideline indication. This can mean a range in which buyers are showing interest and is not an indication of the vendors reserve price. Do your homework and see what other comparable homes are selling for in the area so that you are educated and market conditions.
- Being the under bidder and just missing out can be devastating, but don’t despair, your dream home may be just around the corner so make sure you talk to the agent after the auction and let them know what you are looking for, they often know properties that are just about to hit the market and you may get a sneak preview and beat the crowds.
- Keep an eye out online for passed in properties: If they have failed to sell at auction, that may mean a property that was once not affordable may now be in your price range. Most properties that are passed in sell in the next 10 days after the auction, the seller is motivated and there may be a great buy out there.
- Know your limits: when bidding at auction or negotiating on a property that has been passed in. Keep in mind the amount of money you are able to borrow and don't get caught up in the hype and beating the next person who may have a different budget to you. Act confidently whilst bidding and show your competitors that you mean business.... let them think you have deep pockets!