Ever had a friend or a family member ask you to bid for you at an auction? It is not unusual.
There are many property buyers who can think of nothing more intimidating than bidding to buy a property at an auction. And many others who are away when the auction is taking place and they need someone there to represent them.
I have been to hundreds of auctions and I still feel the enormous weight of responsibility of representing a client when I bid for them at an auction.
You can imagine that as a professional I have had to jump through many hoops to get the correct licensing, accreditation and then accrue over 15 years of experience in order to do this effectively for people.
But every weekend we see people put their trust, and a huge amount of money, in the hands of their parents, friends or work colleagues when they give them the responsibility of bidding for them at an auction.
Here is where it can get very dangerous.
The real estate agent will require the buyer to complete a bidding authority. That document will have the buyers details on it, as well as the bidders details. All good so far.
You will probably have a chat with your friend about how much they want to pay, or maybe they are going to be on the phone talking to your during the auction. This is starting to look a little risky.
You turn up at the auction, show your ID, get your bidding number and after the usual fluffy introduction by the auctioneer, the fun starts. Bidding at auction can be quite a rush for a lot of people and they can get caught up in the emotion and excitement. Others take a very laid-back approach – only coming in right at the end.
Whatever type of bidder you are, there is no doubt that you and your friends will be overjoyed if the hammer falls and you are the successful bidder.
What happens next is where you can really get into trouble.
In Queensland, if you are bidding for someone else and are the successful bidder on the day, then your friend is the buyer. There is no cooling-off period, they need to pay the deposit on the spot (usually 10% of the purchase price) and the balance on the day of settlement.
First “Oh no” moment: The auctioneer won’t let you leave until you can prove that your friend has paid the deposit. If you can’t do that then you might have to cough up the money for them.
Second “Oh no” moment: If for some reason they can’t actually settle on time – maybe they can’t get the finance approved, or one of them loses their job – then the seller can enforce the contract against the bidder – that’s you!
Imagine that…. your friend / family member / colleague asks you to bid for them because they are away for the weekend, you all jump for joy as the hammer drops. Then the bank tells them they will not give them the money.
So the seller will take action against you and enforce the contract. That means you are going to be the buyer of the property that your friend was meant to be buying.
Then you have to take legal action against your friend.
Remember that talk your had before the auction about how much you should bid up to? If you don’t have written evidence of all of their instructions, then you will have a lot of trouble defending yourself in court. All very costly, very drawn out and the end of your relationship. Ouch.
So if someone asks you to bid for them at an auction think very carefully about the consequences.
And having a real estate agent bid for them is dangerous in a different way, more on that in my BLOG – Other People’s Money .
The way to avoid this is to only use a licensed buyer’s agent to bid at auction. A small investment in our services will save a huge headache, and your beautiful relationship.
For more information about auction bidding or preparing for and searching for your new home contact our team of home buying experts.
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To talk about your own plans, contact one of our passionate Property Pursuit Buyers’ Agents.