What do I need to do before bidding at an auction?

Before attending an auction, you must complete all due diligence including building reports and valuations, ensure your finance approval is valid and any conditions are met, check with your lender that the property is suitable security, verify any defects that may affect insurance, and get written approval for KiwiSaver withdrawal eligibility if applicable.

Can I include conditions when buying at auction?

No. When you buy at auction, the sale is unconditional. This means you cannot include conditions for finance, building reports, or LIM reports. All due diligence must be completed before auction day, and you need confirmed finance approval before bidding.

What happens if a property passes in at auction?

If a property does not reach the vendor's reserve price, it passes in. You can then make an offer or a back-up offer through negotiation with the vendor. You should seek legal advice as each scenario has different issues that could arise, and you need to understand how any conditions work and when they start.

How long should I allow for KiwiSaver withdrawal for an auction purchase?

You should get written approval of your KiwiSaver withdrawal eligibility before the auction. Allow 15-20 working days for the funds to be released once paperwork is submitted after settlement date is set. There are usually retention rules if KiwiSaver funds are used for the deposit rather than at settlement, which affects your timing.

Legal Toolkit: Purchasing A Property At Auction

The team at Schnauer & Co's have put together a resource toolkit to highlight some of the common misconceptions that some first home buyers have. Part 4 will detail the auction process and some of the risks associated with buying at auctions.

Purchasing a Property at Auction

Auctions have been the most popular property selling method for vendors in NZ for some time now and most of you will be familiar with the process – a property is offered for sale to the public (usually, the bidders have to register their interest in advance with the selling agent) and once the seller's reserve price is reached, the property is sold to the buyer with the highest bid. For a comprehensive overview of the auction process, see our guide on what first home buyers need to know when buying at auction.

Critical: With auctions, the critical element is ensuring you have completed your due diligence in advance of attending the auction and disclosed any defects to your lender. Also ensuring that you have your finance in order so that you know how much you can bid up to.

In light of the change in the property market, vendors are now considering different selling methods. Regardless of whether you buy a property at auction or via a standard agreement for sale and purchase by negotiation, we suggest you do the following:

Before Attending an Auction:

Seek legal advice before signing any legally binding contract
Ensure your finance approval is still valid and check that any finance conditions are met in advance of the auction
Read the fine print on any loan pre-approval documentation and check with your lender that the property you will be bidding on will be adequate security for the loan
If there are any valuation or building reports required, this needs to be passed on to the bank and your mortgage broker to consider before attending an auction
Check if there are any defects with the property that may affect your ability to obtain adequate insurance cover

KiwiSaver Considerations:

Get written approval of your eligibility to withdraw any KiwiSaver funds (if applicable) and also find out what your KiwiSaver provider's turnaround time is. We usually like to allow 15-20 working days once the paperwork is submitted and there are usually retention rules that apply if KiwiSaver funds are used for the deposit rather than at settlement. You need to consider this when making an offer to purchase or attending an auction.

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If a Property Passes In:

If a property passes in at auction and you want to make an offer or you want to make a back-up offer then you need to seek legal advice. Each property selling method scenario has a different set of issues that could arise and you need to understand how any conditions work and when they start.