Auction Preparation for Purchasers

Gibson Sheat
Published on

Property is often purchased and sold in New Zealand, particularly in a seller’s market, via auctions. However, buyers frequently under-prepare for an auction and are caught out when the hammer falls.

When purchasing at auction, a buyer is making an offer unconditionally. In essence, this means that the highest bidder over the reserve (being the lowest sum that the seller determines it will sell at) is making a binding cash offer and entering a binding agreement with the seller.

Accordingly, buyers need to have completed all of their due diligence investigations and asked all of their key questions before the auction.

Talk to the agent

Before attending and bidding at an auction, buyers should obtain as much information as possible about the property by:

  • Talking to the listing agent;
  • Reviewing the history of the land and the buildings via reports provided by the seller, the agent or purchased via a lawyer or the local council; and
  • Asking questions about the number of parties interested in bidding at auction and at what price such parties are registering their interest.

Some of the types of reports that a buyer might need will be contained in the agent’s auction pack.

Any buyers considering a bid should register their interest with the agent.

If a third party makes a pre-auction offer, the auction must be brought forward. As such, interested buyers will need to be prepared to bid at the early auction, including having funds available to pay the deposit which must be paid on the auction day.

Review the auction terms and conditions

The agent should provide potential buyers with a copy of the auction terms and conditions of sale.

Buyers should review these terms carefully, to ensure that the proposed chattels list is correct and that the settlement date is practically and financially achievable.

Buyers should also be checking these terms to see whether any standard conditions have been deleted or varied, including disclaimers of warranties or information about a property. This aspect (if not the terms as a whole) should be reviewed by a lawyer for certainty.

Get legal advice on the title

In becoming the buyer, the successful bidder will have accepted the legal title to the property (the instrument that details the key legal interests and restrictions that apply to the land) and the auction terms and conditions of sale. It is, therefore, extremely important that prospective buyers seek advice on the title before attending an auction; prudent buyers will also have taken advice on the auction terms and conditions of sale.

If, in obtaining advice, a buyer discovers an issue with the property, agreement or the title, he or she may raise such an issue as part of pre-auction negotiations. In some instances, variations may be agreed such that they apply in respect of the successful bid as between the seller and the particular buyer that negotiated such variations.

Due diligence

A Land Information Memorandum (LIM) is a report prepared by the relevant Council which provides historical and current information relating to the property, land and any buildings. Prospective buyers are strongly advised to obtain a LIM report.

A LIM report enables a buyer to ascertain whether buildings and/or structures on the land which require consent, such as a dwelling, spa pool, garage or fireplace have been approved by the local council, and appropriate permits (pre 1991) or Code Compliance Certificate (post 1991) have issued. In addition, a LIM report may provide information on the zoning of the area and natural hazards.

Builder’s report and contamination testing

Obtaining a builder’s report entails engaging a qualified builder to perform a pre-purchase inspection, and provide a written report outlining any significant building defects. A comprehensive builder’s report can be expected to include advice on fences, paths, retaining walls, foundations, insulation, ventilation, plumbing, drainage, structures and roofing materials.

Contamination tests are also becoming more common. Contamination tests measure toxicity within a building, and provide information on whether it is safe to work or live in. High toxicity levels may result in health risks and time consuming and costly decontamination processes.


As auctions are based on potential buyers making unconditional offers to the vendor, it is essential that any necessary finance is arranged and registered valuation obtained (if required by the lender) prior to bidding at auction and that buyers are in a position to draw down the funds on the designated settlement date.


In summary, buyers should gather as much knowledge as possible on a property before bidding at an auction. Doing so will enable buyers to better set a purchase price that they may be comfortable bidding to; it will also help the bank and insurance brokers to give a keen buyer the promises and backing that he or she needs to bid.