What is a vendor bid? Who decides a reserve price? Your Canberra auction questions answered by real estate agent Alec Brown

Understanding the difference between types of property sales is a good place to start, according to Ray White Canberra sales director and auctioneer Alec Brown.

In a private treaty sale, the seller sets a price and buyers present their offers, whereas an auction sees the offers presented in a public format.

"The key difference is that an auction is what we call 'cash and unconditional' in the sense that if you're the highest bidder, you have bought it, there's no cooling off, there's no subject to finance [clause]," Mr Brown said.

"It doesn't mean that you have to have the money in cash, it just simply means that you are a buyer who has already arranged your finances and you are in a position to exchange on a contract."

It's recommended buyers do their due diligence to ensure they are comfortable and ready for the auction. This can include working with a bank or mortgage broker to obtain finance approval and meeting with a conveyancing solicitor to review the contract of sale.

Mr Brown said each buyer will be bidding on the property under the terms agreed to with the seller.

"It is a possibility to discuss things post-auction, but there's certainly no guarantees because at the end of the day, the seller retains the right to execute the contract in which you bid on, unless you negotiated before in advance," he said.

One of the most common contract amendments seen in the ACT is settlement date. Traditionally 30-day settlements are the norm, however longer, 45-day settlements are becoming more common.

Many ACT bidders will also negotiate to have the standard 10 per cent deposit amended to 5 per cent, which is to be paid on auction day if successful.

"It's important to understand that even if you've agreed to a 5 per cent part deposit, as a buyer you are legally held to 10 per cent of the purchase price always being at risk, should you rescind on the contract and not be able to complete [the sale]," Mr Brown said.

Just because one buyer negotiates a term, such as longer settlement period, that term doesn't automatically apply to other buyers' contracts.

"That's where it pays to make sure that you are bidding on the terms that suit you, or at least you are comfortable with," he said.

Mr Brown said bidders should arrive at the auction with plenty of time and ensure they bring a form of identification with them to register.

The reserve is a minimum sale price set by the seller. The auctioneer may pause the auction to discuss the reserve with or "take instructions" from the seller.

"A reserve is essentially [the seller's] expectations on the day ... the people bidding against each other are potentially bidding against the reserve as well," Mr Brown said.

"There is no obligation or nor will most agents ever disclose what the reserve amount is. But at some point, you might hear that terminology that 'we are on the market', 'we are selling' ... to tell everybody that at this point the highest bid will certainly win."

Auctioneers can refuse a bid or suggest a larger bid increment. Mr Brown said bidders shouldn't be discouraged by this.

"Generally speaking a good auctioneer, if they do have to refuse your bid, will at least politely decline and give you some reference point of where you need to be," he said.

The auctioneer is permitted to make one vendor bid during the auction, which is a bid on behalf of the seller. The auctioneer must clearly state that it is a vendor bid.

Mr Brown said they are becoming more prevalent and are used by some agents to move bidding along and get it closer to the reserve price.

"In its purest form, a vendor bid is a more formal way of giving people guidance of where they will need to be above to even be considered for the property," he said.

"It's not a reflection of the reserve price, a vendor bid is always below the reserve price."

If an auction doesn't reach the reserve price, it is passed in. The highest bidder at the auction has the first right of refusal and the opportunity to negotiate a sale price with the seller post-auction.

Mr Brown said while the highest bidder has the first right of refusal, there is no set timeframe for a deal to be struck. If the top bidder decides not to negotiate, the seller can move on to other bidders.

"The only timeline is that we can still sell under auction terms up until midnight the day of the auction," he said.

After midnight, the sale defaults to private treaty terms.

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When the hammer falls and the auctioneer declares the home "sold", it's a straight-forward process from there, Mr Brown said.

"Your two obligations when purchasing at an auction is you'll need to immediately complete the contract of sale and you'll also need to pay that arranged deposit that was agreed upon," he said.

Mr Brown's top tip for bidders is to decide on three prices before the auction.

"What's a good price for the property that you'd love to pay, what's a fair price based on where you feel it's comfortable and, more importantly, [the top price] you would be prepared to go to," he said.

"If you go into an auction prepared with those numbers, it will just help lift some of the stress."

He also suggested buyers familiarise themselves with auctions ahead of time.

"I would recommend to any buyer get a feel for it, pop along to one or two different auctions ... and just see how things are done. Be prepared to ask questions afterwards."

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