Hello

I’m not sure I’ve met too many vendors that are not nervous on auction day. The thing is though, the buyers can be just as nervous. Not all auctions go to plan, sometimes they pass in because the bidding doesn’t reach the reserve price and sometimes, they even pass in without a single bid.

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There are 2 types of a passed in auction. The first type is the situation when the auction has been held and 1 or more buyers made bids, but the house didn’t reach the reserve price. In this case usually the buyer that made the highest bid would be taken inside the house and between the agent and the buyer they will try to make an agreement on price and sell the house. If you are the buyer in this situation, be careful because you are usually at a disadvantage as the agent may have 10 or 20 years’ experience with real estate negations. Think about your job, were you as capable on your first day as you were 5 or 10 years later? One of the most common tricks is for the agent to put the reserve price up so that you feel like you are winning the negation by having them come down. You could even go up in price beyond what the reserve price was at the start of the auction. Having said that this time can work for you. The vendor is probably extra nervous now and wants to secure a sale. So, tread carefully and don’t be afraid to make small increases on your price until a deal is done. The vendor would usually be more realistic with their bottom line now. Be aware that most real estate agents will try to speed up the process and give you less time to make a decision.

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The second type of a passed in auction is much less exciting. If an auction concludes without a bid or a bid within $100,000 or more of the reserve price the house will be declared as “passed in”. This is when the agent really must go to work. They would usually contact all the buyers that inspected the house to see if they have any interest. The house would normally be put on at a static price or they might keep a price range on it. It’s not all doom and gloom for the vendor, it just means that that dream result is probably not there and that they now can look at offers that are conditional. That is offers that are subject to finance, building & pest inspections etc. The open houses will usually continue until the house has sold. Often “passed in” properties sell within a week or 2 of the auction but if they are overpriced they may not sell at all. This is the worst case for a vendor and it’s easy to blame the agent, the weather on the day, the market, but almost always a house goes unsold because the price is too high. It’s hard not to take that personally but that is the reality.

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In summary, whether you are the buyer or vendor of a passed in auction try not to be too disappointed. As the buyer you may have a great chance to secure a purchase still and as a vendor even if you don’t sell on the day, short of your house being really overpriced you should be able to secure a deal within a few weeks.