What Is a Property Auction in Australia?
A property auction is a public sale where a property is sold to the highest bidder on the day, subject to a reserve price set by the seller (vendor). Auctions are a common method of selling property in both Queensland and New South Wales, and understanding exactly how they work is essential for anyone considering buying or selling at auction in either state.
The auction process in QLD and NSW differs in several important ways, from how contracts work, to cooling off rights, to what happens when a property is passed in. Understanding these differences before you attend an auction, as either a buyer or a seller, can save you from making expensive mistakes.
At Milana Law, we prepare and review auction contracts for sellers (vendors) and buyers (purchasers) across QLD and NSW, ensuring every client is fully informed before auction day.
⚠️ General information only, not legal advice. Contact Milana Law before bidding at or listing for auction in QLD or NSW.
How Does a Property Auction Work, Step by Step?
Before the Auction
For sellers (vendors) in NSW:
The vendor’s conveyancer must prepare a Contract for Sale, including all prescribed disclosure documents, before the property can be marketed. This contract is available for inspection by potential buyers before the auction. The vendor sets a reserve price with their agent, the minimum price they are willing to accept. This figure is kept confidential from buyers.
For sellers in QLD:
Under the Queensland seller disclosure regime effective 1 August 2025, sellers must provide a Form 2 Seller Disclosure Statement and prescribed certificates to prospective buyers before the buyer signs any contract, including at auction. Sellers should have Milana Law prepare this disclosure documentation well before the auction date.
For buyers and purchasers in both states:
Before attending an auction, a buyer should:
- Obtain and review a copy of the contract, in NSW this is the Contract for Sale prepared before marketing; in QLD it is the auction contract prepared by the seller’s conveyancer
- Have the contract reviewed by Milana Law before the auction, not after
- Obtain unconditional finance approval, not just pre-approval, before bidding
- Arrange a building and pest inspection before the auction day
- Register to bid if required by the agent
- Confirm the deposit requirements, typically 10% payable on the fall of the hammer
This preparation must happen before the auction, because if you are the successful bidder, you sign the contract and pay the deposit immediately. There is no time to arrange inspections or finance after the fact.
What Happens on Auction Day?
The auction begins
The auctioneer opens the auction and calls for bids. Bidding begins and buyers compete publicly, each bid is visible to all attendees.
The reserve price
The seller has set a confidential reserve price. The property is not sold until bidding reaches or exceeds the reserve. If the reserve has been met, the auctioneer will typically announce that the property is “on the market”, meaning the next highest bid will secure the property.
The fall of the hammer
When the auctioneer brings the hammer down on the final bid, and the reserve has been met, the property is sold unconditionally. The successful bidder and the seller (vendor) sign the contract immediately on the day. The buyer pays the deposit, typically 10% of the purchase price, on the spot.
If the reserve is not met, passed in
If bidding does not reach the reserve price, the property is passed in. The highest bidder typically has first right to negotiate privately with the seller after the auction. If negotiations are successful, contracts are exchanged at that point. If no agreement is reached, the property may be relisted.
What Are the Most Important Rules About Auctions in QLD and NSW?
No Cooling Off Period at Auction
This is one of the most critical facts about buying at auction in both QLD and NSW, and one of the most misunderstood.
In NSW: There is no cooling off period for properties purchased at auction. Once the hammer falls, the purchase is unconditional and binding. The purchaser cannot withdraw without being in breach of contract. This is fundamentally different from a private treaty purchase in NSW, where a cooling off period of 5 to 10 business days applies.
In QLD: Similarly, properties sold at auction do not have the standard five business day cooling off period that applies to private treaty sales. Once the hammer falls in QLD, the contract is unconditional, the buyer cannot withdraw.
This means everything that a buyer would normally do during the cooling off period, obtaining finance approval, arranging building and pest inspections, reviewing the contract, must be completed before the auction. Not after.
No Finance Clause at Auction
In QLD, auction contracts do not include a finance clause. There is no built-in right to exit if the buyer cannot obtain finance. In NSW, there is no finance clause at auction, and importantly, there is no separate finance condition at all. In NSW, finance is handled entirely within the cooling off period. This means a NSW buyer who purchases at auction has no cooling off period and no finance clause, making unconditional loan approval before bidding absolutely critical.
If a buyer bids at auction and wins, but then cannot settle because their finance falls through, they are in breach of contract and may lose their deposit and face further legal action from the seller. This is why obtaining unconditional loan approval, not just pre-approval, before bidding at auction is essential in both states. Pre-approval is not a guarantee. A valuation that comes back below the purchase price can result in a lender reducing or withdrawing a loan offer. If this happens after winning an auction, the buyer is in a very difficult position with no contractual protection.
No Building and Pest Clause at Auction
In QLD, auction contracts do not include a building and pest inspection clause. In NSW, there is no separate building and pest clause at auction, and no cooling off period within which to exercise one. In NSW, building and pest inspections are conducted entirely before the auction or during the cooling off period on a private treaty sale, at auction, there is no cooling off, so the inspection must be completed before you bid.
A buyer who purchases at auction and then discovers significant structural issues or pest damage has no contractual right to exit or renegotiate on that basis, in either state. This is why a building and pest inspection must be arranged and reviewed before the auction day, not as an afterthought. Milana Law advises all auction buyers to complete their building and pest inspection well before the auction, and to have the report reviewed carefully before deciding whether and how much to bid. Evidence of the property’s condition should be documented before the auction. Once the hammer falls, any dispute about the property’s condition at the time of sale becomes significantly harder to resolve.
What Is the Difference Between Buying at Auction and Buying by Private Treaty?
| Auction | Private Treaty | |
|---|---|---|
| Cooling off period | ❌ None, in both QLD and NSW | ✅ 5 business days (QLD) or 5–10 business days (NSW) |
| Finance clause | ❌ Not included in either state, in NSW, finance is handled within the cooling off period on private treaty; at auction there is no cooling off or finance clause | ✅ Standard in QLD; negotiated as special condition in NSW private treaty |
| Building and pest clause | ❌ Not included in either state, in NSW, B&P is done before exchange or during cooling off on private treaty; at auction there is no cooling off | ✅ Standard in QLD; done before exchange or during cooling off in NSW |
| Contract signed | Immediately, on the fall of the hammer | At exchange, after negotiation |
| Deposit paid | Immediately, typically 10% on the day | At exchange, typically 10% |
| Price negotiation | Public, competitive bidding | Private, between buyer and seller |
| Finance approval needed before | Yes, unconditional before bidding | After exchange, within finance clause period |
| Building and pest needed before | Yes, before bidding | After exchange, within B&P clause period |
What Happens If I Am the Highest Bidder But the Reserve Is Not Met?
If the auction is passed in, meaning bidding did not reach the seller’s reserve, the highest bidder typically has the first right to negotiate privately with the seller immediately after the auction.
This negotiation takes place without the pressure of competing bidders. In many cases, passed-in properties are successfully sold after the auction through private negotiation.
Important: If a property is sold after being passed in through private negotiation in NSW, the sale is by private treaty, and the standard NSW cooling off period and other private treaty protections may then apply. The terms of any post-auction private treaty sale depend on the specific agreement reached.
In QLD, if a property is passed in and subsequently sold by private treaty, the standard REIQ contract terms, including cooling off and finance clause, may apply to the private treaty sale.
What Should a Buyer Do Before Bidding at an Auction in QLD or NSW?
Because auction purchases are unconditional from the moment the hammer falls, preparation before the auction is everything. Here is what every buyer and purchaser should do before bidding:
Step 1: Obtain and review the contract
Request a copy of the contract from the agent as early as possible, ideally as soon as the property is listed for sale. Contact Milana Law to review the contract before the auction. This is not optional, the contract is binding from the moment you win the bid.
Step 2: Arrange a building and pest inspection
Book and complete a building and pest inspection before the auction day. Review the report carefully. If significant issues are found, factor this into your maximum bid or consider not bidding.
Step 3: Obtain unconditional finance approval
Contact your broker or lender and ensure you have written unconditional approval, not just pre-approval, before the auction. The lender must have completed their valuation of the specific property. Do not bid without unconditional finance approval in hand. This is especially critical in NSW, where there is no cooling off period and no finance clause at auction. In NSW, all finance and building and pest work is done within the cooling off period on private treaty sales, at auction, there is no cooling off, so everything must be done beforehand.
Step 4: Know your maximum bid
Decide your maximum bid before the auction, not during it. Auction environments create emotional pressure. Knowing your absolute limit before you enter helps you bid with discipline and avoid overcommitting.
Step 5: Understand deposit requirements
Confirm with the agent what deposit is required on the day and ensure those funds are available. In both QLD and NSW, the deposit is typically 10% of the purchase price, payable immediately on the fall of the hammer.
Step 6: Register to bid
Some agents and some states require buyers to register before the auction. Confirm the registration requirements with the agent before the auction day.
What Should a Seller (Vendor) Know About Auctioning Their Property in QLD or NSW?
Setting the reserve price
The reserve price is the minimum price the seller will accept. It is set confidentially before the auction and can be adjusted during the auction at the seller’s discretion. Setting a realistic reserve, guided by the agent’s market advice, is critical. An unrealistic reserve results in a passed-in property and wasted marketing spend.
The contract must be prepared before marketing
In NSW, the Contract for Sale must be prepared by the vendor’s conveyancer, with all prescribed disclosure documents, before the property can be advertised or marketed for auction. Milana Law prepares NSW auction contracts with full compliance from the outset.
In QLD, the Form 2 Seller Disclosure Statement must be provided to prospective buyers before any contract is signed, including at auction. Milana Law prepares the QLD Form 2 and all prescribed certificates for every seller client.
Vendor bid
In both QLD and NSW, a vendor bid is a bid made by or on behalf of the seller, typically by the auctioneer, to stimulate bidding. Vendor bids must be clearly announced as such by the auctioneer and are subject to specific rules under state-based property legislation. A vendor bid cannot be the winning bid, the property cannot be sold to the seller themselves.
What if the property is passed in?
If the property is passed in, the seller has options, negotiate privately with the highest bidder, adjust the reserve for a subsequent auction, or relist by private treaty. Milana Law advises sellers on their options if a property is passed in and guides the post-auction process.
What Is a Dummy Bid and Is It Legal?
A dummy bid is a false bid made by someone who has no genuine intention of buying the property, often arranged to inflate the price and create the impression of competitive bidding. Dummy bidding is illegal in both Queensland and New South Wales.
Under the Property and Stock Agents Act 2002 (NSW) and the Property Occupations Act 2014 (QLD), dummy bidding is a serious offence attracting significant penalties. Buyers who suspect dummy bidding at an auction should raise it with the auctioneer immediately.
Frequently Asked Questions About Property Auctions in QLD and NSW
Q: Can I make an offer before auction day?
Yes, in both QLD and NSW, a buyer can approach the agent before the auction and make a pre-auction offer. If the seller accepts a pre-auction offer and agrees to sell before the auction, the sale proceeds as a private treaty transaction, with the standard cooling off and condition provisions that apply to private treaty sales in that state. The auction is then cancelled.
Q: Do I need a conveyancer before an auction?
Yes, absolutely. The contract that you will sign on auction day if you are the successful bidder should be reviewed by Milana Law before the auction, not after. Once the hammer falls, the contract is binding. There is no opportunity to have it reviewed, negotiate amendments or exit without penalty after the auction.
Q: What happens if I win the auction but cannot settle?
If the buyer wins an auction and then cannot settle, for any reason, including finance falling through, they are in breach of contract. The seller may retain the deposit and pursue the buyer for any additional loss suffered. This is exactly why unconditional finance approval before the auction is not optional.
Q: Can I bid at an auction without attending in person?
In both QLD and NSW, buyers can bid by proxy or phone in some circumstances, where the auctioneer or agent facilitates this on the buyer’s behalf. The same rules and obligations apply regardless of the method of bidding, once the proxy bid wins, the contract is binding and the deposit is due.
Q: What is the deposit at auction and when is it paid?
The deposit is typically 10% of the purchase price and is payable immediately on the fall of the hammer. The successful bidder is required to pay the deposit on the auction day before leaving. In some cases a different deposit amount may be specified in the contract, which is another reason to review the contract before the auction.
Q: Does a cooling off period apply if I buy after auction through private negotiation?
If a property is passed in at auction and subsequently sold through private treaty negotiation in NSW, the standard cooling off period may apply, because the sale is then by private treaty rather than auction. In QLD, similarly, a post-auction private treaty sale may attract the standard cooling off period. Confirm with Milana Law for your specific situation.
Q: What is a vendor bid and how do I know if one has been made?
A vendor bid is a bid made by or on behalf of the seller, typically by the auctioneer, to stimulate bidding. The auctioneer is legally required to clearly announce any vendor bid as such. If you hear the auctioneer announce a bid on behalf of the vendor, that is a vendor bid. It is legal. Dummy bids, where someone with no genuine intention to buy bids to inflate the price, are illegal in both states.
How Milana Law Helps Buyers and Sellers at Auction in QLD and NSW
At Milana Law, we work with both buyers (purchasers) and sellers (vendors) through the auction process in Queensland and New South Wales, ensuring every client is fully prepared, fully informed and fully protected before auction day.
For QLD sellers and NSW vendors:
✅ Auction contract prepared, with all required disclosure documents, before marketing begins
✅ QLD Form 2 Seller Disclosure Statement prepared accurately and on time
✅ Vendor bid rules and auction compliance advice
✅ Post-auction private treaty management if the property is passed in
For QLD buyers and NSW purchasers:
✅ Contract review before the auction, so you know exactly what you are signing if you win
✅ Advice on what inspections and finance approvals must be in place before bidding
✅ Clear explanation of the no cooling off, no finance clause, no building and pest clause rules
✅ Available after hours, because auction preparation questions arise at all times
✅ Fully online, clients across QLD and NSW served from anywhere
📞 QLD: 07 3522 1422 | 📞 NSW: 02 8360 8999 | 📧 info@milanalaw.com.au | 🌐 milanalaw.com.au