“Passing in at auction” - What does it mean & what should I do?
When you are at an auction, sometimes there is a big gap between what the top bidder wants to pay and what the property owner (vendor) wants to sell for – what happens then? Often, the property is passed in and I'm going to break down what that means.
What is passing in at auction?
When the top bid at an auction has not reached the vendors’ reserve price - the lowest price they are willing to sell the property for.
What happens next?
Usually, the highest bidder has the first right to purchase the property at the vendors’ reserve price, once this has been disclosed. The real estate agent will often bring the highest bidder into the home to talk privately and help negotiate the sale. The highest bidder and the property owner have a chat about the price and try to negotiate - this is usually done in private. If the highest bidder does not wish to proceed at the reserve prize, then it is often opened up again for all to make an offer.If you are next in line from the top bid, don't worry - if the top bidder and the vendor can't come to an agreement on the property, you may have a chance to put an offer forward. If your offer is then 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.After the auction is passed in there also might also be an opportunity to make a conditional offer.
Top tips for buying at auction
- Always inform the agent that you are interested - they will keep you up to date with any changes.
- Do your homework and see what similar homes are selling for in the area, so that you aren’t taken by surprise.
- Make sure you are unconditionally approved with your bank. Being pre-approved for a certain amount is not sufficient. The pre-approval is always conditional on the property being acceptable to the bank. Thus, make sure your bank has signed off on this property specifically!
- Make sure your lawyer has reviewed the legal documents and you’re satisfied with the build condition. You are buying unconditionally, thus, there is no turning around after the auction.
- Know your limits but bid confidently.
- Have your deposit ready.