17 July 2026 | See disclaimer
Property auctions are a popular, yet intimidating, way to buy homes in Australia.
Unlike traditional sales, you sign the contract and pay a deposit instantly when the hammer falls, with no cooling-off period.
Doing your homework, understanding the process, and working with professionals and thorough preparation can help increase your chances when buying a home at auction.
This guide provides essential steps for first-time buyers, covering inspections, finance, bidding strategies, and insurance checks to help you secure your dream home.
Arrange Pre-Purchase Inspections
The very first step is a pre-purchase home inspection.
Since you cannot renegotiate or back out after an auction, this due diligence is vital to find faults early. A home’s building condition can affect both your own safety and your insurability. Arranging a building and pest inspection and, where applicable, thoroughly reading a property’s strata report can potentially reduce the risk of facing unexpected repair costs and insurance complications down the track.
It’s worth keeping in mind that the construction type, age and condition of the home you’re looking to buy can also affect your home insurance premium and cover. Most insurers will ask about the property’s condition and seek information about known defects or structural issues to ensure the home is well maintained, structurally sound, watertight and in good condition. Conducting a building and pest inspection can help you avoid and identify potential problems before you buy.
It’s also important to note that homes in high-risk bushfire or flood zones may increase your overall premium or the insurer’s ability to offer cover.
While inspections cost between $400 and $800,[1] they could save thousands on later repairs.
Hire a reputable, licensed building inspector before the auction.
Pre-purchase inspection details
| Inspection Type | Key Focus / Detail |
|---|---|
| Building and Pest | A thorough inspection checks:
for any signs of damage that could cost thousands to repair. |
| Strata Reports (for units/apartments) | Looks at the owners corporation records for upcoming special levies to check if there are planned maintenance works or disputes that could affect your investment. |
Get Loan Pre-Approval
To make sure you can make an offer on your dream property on auction day, you need to know your limit by getting your home loan pre-approval from your bank or lender well in advance of the auction date.
But be aware of the difference between conditional and unconditional approval.
| Approval Type | Definition / Detail |
|---|---|
| Conditional Approval | Subject to further checks (valuation, etc.). This means the bank likes your application but needs to verify certain details before final approval. |
| Unconditional (Formal) Approval | The bank has fully approved the finance. Some banks insist you have formal approval before you bid. |
Starting this process at least four to six weeks before the auction gives you the best chance of securing approval in time.
Find a Solicitor and Review The Contract
It’s essential to have a professional legal review of the contract of sale before the auction day.
While there is a cost associated with this, it is small compared to the total cost of a home and helps you bid with confidence by identifying:
- Unfavourable terms or special conditions
- Easements or covenants on the land that may restrict how you use the property
- Zoning issues that could affect future development plans
- Outstanding rates, levies, or other debts attached to the property
Understand the Home’s Market Value
Auction day moves fast and so might the price. You can prepare by:
- Doing your research: Look at recent sales of comparable homes in the area within the last three months.
- Detailed property analysis: Don’t rely solely on the agent’s word. Use online property databases and attend other local auctions to get a realistic sense of what similar properties are actually selling for.
- Avoid bidding on emotion: While a home is worth what the market is willing to pay, try and avoid bidding on emotion. Often bidders can get caught up in the moment and excitement of an auction and bid much higher than the home’s market value in order to secure the winning bid.
Arrange Insurance Before You Bid
It’s risky to assume the seller’s insurance covers the property.
In many Australian states, risk passes to the buyer immediately after the auction. That means if an insured event, such as a storm or fire, damages the property between auction day and your settlement date, which can be anywhere from 30-90 days away, you may be legally obligated to complete the purchase and pay the repair bill. This can lead to out-of-pocket expenses to fix a home you haven’t yet moved into.
To ensure you’re protected from the moment you sign the contract and pay your deposit, it’s best to organise your insurance well before auction day to avoid this potential and expensive coverage gap.
Master the Auction Terms
You need to learn the language of auctions before you start to bid. Terms like “dummy bids”, “reserve price” and “on the market” may be confusing but you need to understand what they mean to get the best result at auction.
- Reserve price: The minimum price the seller is willing to accept. The property won’t be on the market until bidding reaches this usually confidential amount. Once the bidding passes the reserve price the property will be sold.
- Passed in: If the bidding does not reach the reserve price, the property is “passed in”. The highest bidder usually gets the first right to negotiate with the vendor after the auction.
- Vendor bid: A bid placed by the auctioneer on behalf of the seller to keep the bidding moving and clearly announced so buyers know it is not a genuine offer from another bidder. The amount of vendor bids allowed and when they can be made can vary from state to state.
- Dummy bids: False bids made by non-buyers to inflate the price. These are illegal and strictly regulated under Australian consumer law.
- On the market: The auctioneer announces this when the reserve price has been met. Now, the property will definitely be sold to the highest bidder. This is the moment when the auction becomes legally binding.
Bidding Strategies for Auction Day
Arrive early to register and get a bidder’s number — only registered bidders can participate. Here are a few tips for success:
- Start slow: Wait for an opening bid to gauge the competition and understand the pace.
- Project confidence: Body language matters; appear decisive by calling out bids clearly to discourage others.
- Small increments: Offer smaller bid rises ($1,000 or $500) near your limit to test other buyers’ resolve.
- The “Knockout Bid”: A strong, bold jump bid ($20,000 or $50,000) can signal you have deep pockets and intimidate other buyers.
- Set a “Walk Away Price”: Being emotional is the enemy. If the price goes above your absolute limit, stop immediately.
What Happens If You Win?
Congratulations! Once you’re the successful bidder, the formal steps move fast and you have to sign the contract of sale and you will have to pay the deposit — on the spot.
- Sign the contract: This will be signed immediately, usually right at the auction.
- Pay the deposit: This must also be done on the spot, usually via a bank cheque, deposit bond or electronic transfer (if arranged prior). This is usually 10% of the purchase price.
- No cooling-off: You cannot change your mind or back out without losing your deposit and potentially facing legal action.
Award-Winning Home Insurance Cover
The auction process doesn’t have to be overwhelming. Be aware of your requirements, work with professionals and ensure you have your insurance sorted to make this a simple process.
You can save 30%^ on your first year's premium when you purchase your combined Home and Contents Insurance with Budget Direct online.
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