Legal Framework
In Queensland, as per Property Occupations Act 2014, selling property at auction involves a distinct set of legal conditions that every seller and buyer must understand.
- Unconditional Sale: Once the auction hammer falls, the winning bidder must immediately enter an unconditional contract of sale. Unlike private treaty sales, there is no cooling-off period and no option to include conditions such as “Subject to Finance”, “Subject to Building and Pest” or other conditions. The settlement period is typically 30 days from the auction date.
- Deposit payment: Before the auction begins, the required deposit percentage is set, typically between 5% and 10% of the final purchase price. If the property sells at auction, the successful bidder must pay this deposit on the day. Once bidding ends, the agent will typically take the buyer inside the property to complete the necessary paperwork and arrange deposit payment.
- Reserve price: Sellers can and would normally set a reserve price in writing before the auction. If bidding does not reach this reserve, the property is passed in (not sold). Under Queensland regulation, the auctioneer must not disclose the reserve price or provide any price guide before the auction. Once bidding reaches the reserve price, the property is considered “on the market”, which means that the winning bidder must purchase the property, and the seller must sell it. During the bidding, the auctioneer may announce that the reserve price has been met, but is not required to do so.
- Public bidding: In Queensland, auctions can only be conducted by licensed auctioneers. They must ensure all bids are publicly visible to the rest of the registered bidders. Bidders may be attending the auction in person, remotely, or represented by a third party.
- Post-Auction Negotiation: If the property is passed in (not sold), the seller can negotiate privately with interested parties. Under Queensland regulations, if the property doesn’t reach the reserve price and a sale is agreed with a registered bidder within two days of the auction, the buyer loses the right to a cooling-off period.
Having outlined the key particulars of selling at auction in Queensland, it’s important for sellers to understand that this method is not without risks. While auctions can generate a sense of urgency and competition in certain circumstances, they also involve factors that can impact the final sale outcome.
Below are three of the main risks sellers should be aware of.
Risk #1 – Smaller pool of buyers
Auctions typically attract a specific subset of buyers — those who are able to move quickly, enter into an unconditional contract of sales, and are familiar with the auction rules and environment.
As a result, sellers may inadvertently exclude a number of qualified buyers willing to pay a higher price with reasonable conditions if sold via private treaty.
Risk #2 – Public price discovery
Auctions are inherently transparent, with all bids publicly visible to attendees. While this may appear to facilitate a better outcome for sellers, it can also prevent sellers from achieving the true highest price for their property.
This risk is best understood through the following scenario:- A property with a reserve price of $2 million attracted two bidders with very different maximum budgets. One bidder was prepared to pay up to $2.1 million, while the other was willing to go as high as $2.5 million. As bidding progressed in standard increments, the price climbed only to $2.2 million — just enough to exceed the reserve and trigger a sale. The property was subsequently reported as having sold for “$200,000 above reserve.
- However, the successful bidder was actually willing to pay $300,000 more than the final sale price. That additional willingness to pay was never revealed to the seller or the wider market due to the structure of the auction process. In this scenario, the seller effectively undersold by a substantial margin, despite a seemingly strong auction result.
- Even if the seller had set a higher reserve price to prevent the property from selling at $2.2 million, this would not necessarily have improved the outcome. In that scenario, the auction would likely have been passed in, leaving the buyer who was prepared to pay up to $2.5 million in a strong negotiating position after the auction. With price expectations already revealed, the seller’s leverage would be reduced, and subsequent negotiations would remain anchored to the final bid of $2.2million rather than the buyer’s true maximum willingness to pay.
Risk #3 – No guaranteed sale
When does an auction make sense?
An auction might make sense only when the three risks outlined above can be effectively mitigated. In other words, your property must be genuinely unique, in a highly competitive segment of the market, and the you must have the flexibility to wait rather than needing to sell immediately.
So this requires to tick the following three boxes:
- Properties with development potential or in the upper luxury segment – such properties tend to attract buyers with the financial capacity to enter into unconditional contracts and the Real Estate experience to confidently participate in an auction. As a result, the risk of inadvertently excluding qualified buyers is minimised.
- Properties in a highly competitive market segment – when a property is positioned within a sought-after and active market segment, multiple interested buyers are likely to participate and genuinely engage in competitive bidding.
- Flexibility to postpone the sale – if the property is passed in, the seller should have sufficient flexibility (in terms of time) to reintroduce it to the market after a reasonable waiting interval, rather than immediately engaging in post-auction negotiations without leverage.
At Onkapa Property, we don’t automatically default to selling by auction. Indeed, only a true minority of properties are genuinely auction material.