James PuahBuying property at auction in New Zealand is a fast-paced and exciting experience — but it also comes with serious risks. Before you raise your hand, it’s vital to understand what you’re committing to. Unlike private sales, auctions offer little room for error or second thoughts.
Here’s what every Kiwi home buyer should know before heading to the auction room.
1. No Cooling-Off Period
Once the hammer falls, the deal is final.
There’s no grace period to change your mind. From the moment your bid wins, you’re legally bound to go through with the purchase. Walking away could land you in legal trouble — and cost you your deposit (or more).
2. Limited Time to Do Your Homework
All checks must be completed before auction day.
This includes:
- LIM report
- Property title search
- Building inspection (and meth testing)
- Reviewing the council property file
- Confirming insurability
- Getting finance pre-approved
- Independent valuation, if needed
You might invest a few thousand dollars into due diligence and still walk away empty-handed.
3. Finance Must Be Unconditional
Conditional finance won’t cut it.
You need to have full loan approval before auction day. If your lender pulls out after your winning bid, you’re still legally responsible to settle the purchase — or face legal action.
4. You’re Buying the Property “As Is”
No warranties. No guarantees.
Once sold, the property is yours — issues and all. This means if there are hidden problems like leaks, unconsented renovations, or structural damage, they become your responsibility.
5. Emotions Can Drive Up the Price
It’s easy to get swept up in bidding wars.
Competitive auctions can push buyers beyond their original budgets. Set a strict price ceiling before the auction and stick to it.
6. 10% Deposit Usually Due Immediately
Most auction agreements require a 10% deposit on the spot, often via electronic transfer or bank cheque.
If you can’t pay immediately:
- You risk breaching the contract
- The seller may cancel the agreement and keep your deposit (if any)
7. No Guarantee of a Sale
If the reserve price isn’t met, the auction might “pass in.”
You could do all the groundwork only to find the property didn’t sell. The seller isn’t obliged to accept any post-auction offers.
8. The Contract Is Often Stacked in the Seller’s Favour
Auction sale agreements in NZ are typically unconditional and heavily weighted toward the vendor.
Without a legal review beforehand, you might unintentionally waive important rights — including the right to challenge the property’s title.
9. Key Legal Differences: Auction vs Standard Sale
Deposit Rules
- Auction: Deposit is due immediately. If unpaid, the seller can cancel without notice.
- Standard sale: Deposit is usually paid once conditions (like finance or building reports) are satisfied. You typically have a grace period to pay.
Title Issues
- Standard agreement: You can raise title problems (e.g. cross-leases, illegal additions) and require the vendor to resolve them.
- Auction: These rights are waived. You take the property as-is, even with potential legal complications.
How to Minimise Risk Before Auction Day
- Have your solicitor review the auction documents in advance
- Get pre-approved for unconditional finance
- Understand what happens if you win (or lose)
- Set a strict price limit — and don’t go over it
- Complete all due diligence before the auction
- Ensure you can pay the deposit immediately if successful
Final Word
Property auctions in New Zealand can offer great opportunities, but they’re not for the unprepared. Make sure you understand the legal and financial commitments involved. If in doubt, seek professional legal advice before bidding. It could save you thousands — or even your deposit.
Need help preparing for auction day?
Reach out to your lawyer and a mortgage adviser early in the process to give yourself the best shot at a smooth and successful purchase.
