Buying at Auction in NSW: What to Do Before the Hammer Falls
Buying at auction in NSW is fundamentally different from buying by private treaty. There is no cooling-off period. When the hammer falls, you are bound. The due diligence that a private treaty buyer does after exchange, an auction buyer must do before the auction. This guide covers everything you need to prepare.
No cooling-off period at auction. Under the Conveyancing Act 1919 (NSW), section 66T, there is no cooling-off period for properties purchased at auction. Winning a bid is an unconditional commitment to buy. All due diligence must be done before you bid.
What to do before auction day
The preparation checklist for an auction buyer in NSW:
- Engage a conveyancer or solicitor early -- ideally as soon as the property is listed, not the week before the auction
- Obtain and review the contract of sale -- in NSW, the vendor's solicitor must provide a complete contract before the property is advertised; ask the agent for it
- Commission a building and pest inspection -- results typically take 24 to 48 hours; allow time to review before the auction
- Get unconditional finance approval -- pre-approval is not enough; you need formal, unconditional approval before bidding
- Arrange your deposit funds -- 10% of the purchase price, in a form acceptable to the vendor (usually bank cheque or cleared electronic transfer)
- Clarify any contract terms you want to change -- negotiate special conditions (such as a longer settlement period) with the agent before the auction, so they are in the signed contract
Contract review: why it cannot wait
For a private treaty purchase, many buyers exchange contracts first and then engage a conveyancer during the cooling-off period. This approach is risky even in private treaty; for auction buyers, it is not an option at all.
The vendor's contract in NSW must include (under the Conveyancing (Sale of Land) Regulation 2022, made under the Conveyancing Act 1919 (NSW)):
- A current title search
- A section 10.7 planning certificate from the local council (zoning, heritage, flood risk, bushfire risk)
- A drainage diagram (sewer pipe locations)
- Any existing occupation certificate or building approval relevant to the property
- Disclosure of any strata report (if applicable)
Your conveyancer will review these documents and advise you on:
- Encumbrances on title (mortgages, easements, covenants, caveats) that will survive settlement
- Adverse zoning or planning overlays (flood zone, heritage listing, bushfire attack level)
- Unusual or onerous special conditions
- Settlement date and any conditions tied to it
- Any tenant in occupation whose lease survives settlement
Do not bid at auction without having received written advice from your conveyancer on the contract. This is not optional.
Building and pest inspection
A building and pest inspection (also called a pest and building report) gives you an independent assessment of the property's physical condition: structural soundness, moisture, defects, and active or inactive pest activity (particularly termites in Sydney and surrounds).
For auction properties, you must organise the inspection before the auction. Most agents will facilitate access for inspections; some high-demand auctions run group inspections. The report typically costs $400 to $700 depending on property size and location, and takes 24 to 48 hours to be delivered after the inspection.
Key points:
- A building report does not cover everything -- it is a visual inspection; it does not include hydraulic, electrical, or specialist structural reports unless specified
- All properties will have some defects noted -- the report is about identifying material defects that affect value or safety
- If the report reveals a major problem (active termites, structural movement, significant water damage), you face a binary decision: withdraw from bidding or factor the remediation cost into your maximum bid
- For strata units, also obtain and review the strata records (meeting minutes, levies, maintenance fund) -- the agent must make these available; your conveyancer can interpret them
Finance approval before you bid
Pre-approval (also called conditional approval or approval in principle) is not the same as unconditional approval. Pre-approval means your lender is willing to lend subject to the specific property being valued at or above the purchase price and meeting the lender's criteria. Unconditional approval means the lender has assessed both you and the specific property and will lend the specified amount.
For auction bidding, you should have:
- Unconditional (formal) finance approval for the property or a similar property in the price range
- A clear understanding of your maximum borrowing capacity and therefore your maximum bid
- Confirmation that your lender's valuation of the property will support your intended bid amount
If you win at auction without finance approved and then cannot complete the purchase, you will be in breach of contract and risk losing your deposit. Lenders can (and do) value properties below purchase price; if this happens, your lender may not fund the full amount and you may need to make up the shortfall in cash.
The 10% deposit
The standard auction deposit in NSW is 10% of the purchase price, payable on auction day. If you win a $900,000 property, you need $90,000 available immediately.
Accepted payment forms vary by vendor, but typically include:
- Bank cheque (made out to the real estate agent's trust account) -- most common
- Electronic transfer on the day -- confirm with the agent in advance that this is accepted and get the account details
- Deposit bond (subject to vendor agreement) -- ask in advance
Personal cheques are generally not accepted for auction deposits. Confirm the accepted form of payment with the selling agent at least a few days before the auction.
The deposit is held in the agent's trust account (or the vendor's solicitor's trust account) until settlement, at which point it is released to the vendor and credited against the purchase price.
On auction day
- Register to bid: most NSW agents require you to register before bidding; bring ID (driver's licence or passport)
- Know your limit: decide your maximum bid before the auction and stick to it; the heat of competition can lead to overbidding
- Watch for vendor bids: the auctioneer must announce when a bid is on behalf of the vendor; vendor bids can only be made below the reserve price
- Listen for 'on the market': when the auctioneer announces "the property is on the market" or "we are at reserve", the next bid wins unconditionally
- Signing: if you win, you sign the contract immediately, pay the deposit, and receive a copy of the signed contract; your conveyancer will confirm the next steps for settlement
What happens if the property is passed in
A property is "passed in" if no bid reaches the vendor's reserve price and the auction ends without a sale. The highest bidder at the time of pass-in typically gets the right of first negotiation with the vendor.
If you are the highest bidder at pass-in, you may negotiate a price directly with the vendor (or their agent). If you reach agreement and sign a contract on the same day as the auction, no cooling-off period applies. If contracts are exchanged on a different day, the standard 5 business day cooling-off period applies (unless you sign a 66W waiver).
After pass-in, the property returns to market as a private treaty sale. You are not committed to buy just because you were the highest bidder at pass-in -- you have no obligation to purchase unless you sign a contract.
Vendor bids and reserve prices
NSW auction law (under the Property and Stock Agents Act 2002 (NSW) and the Property and Stock Agents Regulation 2022) permits vendor bids provided they are clearly announced as such. Key rules:
- Before the auction begins, the auctioneer must announce the maximum number of vendor bids that may be made during the auction
- For residential and rural land auctions, only one vendor bid is permitted during the auction
- The auctioneer must announce immediately before making a vendor bid that it is "on behalf of the vendor" or similar clear declaration
- In practice, vendor bids are used to move bidding upward before the reserve is reached; once the reserve is met and the property "is on the market", vendor bids are no longer used commercially, though the Act does not set a statutory floor in the way that might be inferred
- The reserve price is confidential to the vendor; the agent is not required to disclose it to bidders
After the auction: settlement
If you successfully buy at auction, the settlement period is set in the contract and is usually 42 days (6 weeks), though you may have negotiated a different period before the auction.
During the settlement period:
- Your conveyancer conducts title and rate searches, arranges for the mortgage to be registered, and coordinates with the vendor's conveyancer
- Your lender arranges for the mortgage funds to be ready for the settlement date
- A final inspection of the property is typically conducted the day before settlement
- Settlement is completed electronically -- in NSW, electronic conveyancing is mandatory and the vast majority of settlements use PEXA (Property Exchange Australia), with Sympli as an alternative approved lodgement network
- On settlement day, the balance of the purchase price is transferred to the vendor, title is transferred to you, and keys are released
Frequently asked questions
Is there a cooling-off period when buying at auction in NSW?
No. There is no cooling-off period for properties purchased at auction in NSW. When you are the successful bidder and the hammer falls, you are immediately and unconditionally bound to the contract. You cannot withdraw without breaching the contract and forfeiting your deposit. All due diligence -- building and pest inspections, finance approval, contract review by a conveyancer -- must be completed before the auction date.
What deposit do I need to pay at an auction in NSW?
The standard deposit at NSW auctions is 10% of the purchase price, payable on the day by bank cheque or electronic transfer. You cannot pay the deposit by personal cheque in most cases -- confirm the accepted payment method with the selling agent before auction day. The deposit is held in trust by the agent or the vendor's solicitor until settlement.
Do I need a conveyancer before bidding at auction?
Yes. You should engage a conveyancer to review the contract of sale before the auction. In NSW, the seller must provide a contract of sale (including the s10.7 planning certificate, title search, and drainage diagram) before the property is listed for sale. Your conveyancer will review these documents, identify any adverse conditions or encumbrances, and advise you on any special conditions in the contract. Reviewing the contract after you win an auction is too late -- you are already bound.
Can I add conditions to a contract when buying at auction in NSW?
Generally no. Auction contracts in NSW are unconditional -- you cannot make your purchase subject to finance approval, a building inspection result, or any other condition. If you need to negotiate contract terms (for example, a longer settlement period), you must do this with the selling agent before the auction day, so the agreed terms are in the contract before you bid. Once the hammer falls, the contract is binding as written.
What does 'passed in' mean at auction and what happens next?
An auction is 'passed in' when the highest bid does not reach the vendor's reserve price and the property is not sold under the hammer. After a property is passed in, the selling agent typically invites the highest bidder to negotiate directly with the vendor. If you are the highest bidder at pass-in, you have the right of first negotiation. If a sale is agreed post-auction, the contract is signed and exchange takes place -- and if exchange happens on the same day as the auction, no cooling-off period applies. Exchange on any other day typically restores the 5 business day cooling-off period.
What is a vendor bid at NSW auctions?
A vendor bid is a bid made by the auctioneer on behalf of the vendor (seller) to move bidding to a higher level. Vendor bids are legal in NSW and must be clearly announced by the auctioneer as a vendor bid. They can only be made while the property has not yet reached the reserve price. Once the reserve is reached, no further vendor bids are permitted. If you are bidding at auction, listen for the auctioneer's announcements -- bids described as 'on the vendor's behalf' are vendor bids.
General information about buying at auction in NSW, not legal advice. Every property purchase is different. Engage a licensed conveyancer or solicitor before bidding at any auction. Last updated: June 2025.
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Conveyancing Explained provides general information about property transactions in Australia. It is not legal advice and does not create a client relationship. For advice on your situation, engage a licensed conveyancer, settlement agent, or property solicitor in your state or territory.