Auction in NZ property market

In New Zealand, an auction is a popular method for selling property, where buyers compete to purchase a property by bidding against each other in a public forum. Here’s how it typically works:

1. Preparation: The property is listed for sale by auction, usually through a real estate agent. The agent will set a date and time for the auction and advertise the property to attract potential buyers. They may also provide details about the property’s features, condition, and any relevant legal documents.
2. Open Homes: Before the auction, there are often open homes where prospective buyers can view the property. This allows them to inspect the property and assess its value.
3. Reserve Price: The seller sets a reserve price, which is the minimum price they are willing to accept for the property. If bidding does not reach this reserve price, the property may not be sold.
4. Auction Day: On the day of the auction, interested buyers gather at the auction venue, which could be at the property itself or a separate location. The auctioneer starts the bidding process, and participants place their bids.
5. Bidding: Bidders raise their bids in increments until no one is willing to offer a higher price. The auctioneer facilitates this process, calling for bids and managing the pace of the auction.
6. Winning Bid: The highest bid that meets or exceeds the reserve price wins. The successful bidder is required to sign a sale and purchase agreement immediately, and a deposit is usually paid on the spot. If the winning bid does not meet the reserve price, the property may be passed in and negotiations may continue afterward with interested parties.
7. Post-Auction: If the property is sold at auction, the sale is typically unconditional, meaning the buyer cannot back out of the purchase without facing penalties. If the property does not sell at auction, the seller may negotiate with interested parties or relist the property for sale by other methods.

Advantages of Auctions:

• Competitive Bidding: Auctions can drive up the sale price through competitive bidding.
• Transparency: The process is transparent, with all interested buyers able to see the bidding progress.
• Speed: The auction process is relatively quick, with a sale often completed within a few weeks.

Disadvantages of Auctions:

• Uncertainty: There’s no guarantee the property will sell, or that it will sell for the expected price.
• Pressure: The competitive nature of auctions can put pressure on buyers, potentially leading to emotional bidding.

Overall, auctions are a dynamic and transparent way to sell property, appealing to both buyers and sellers who are looking for a potentially swift and competitive transaction.