Public Auction ReAl PRoPeRty AGENTS AND AUCTIONEERS BEST PRACTICE PROCEDURES Public Auction Real Property Endorsed by The Society of Auctioneers and Appraisers SA Inc and The Real Estate Institute of South Australia Version December 2009* (note based on draft Regulations December 2007 and February 2008)
CHECKLIST Form Number SAA/REISA Form Legislation Reference 1 Must carry your Registration Card at all times Section 11B Land Agents Act 1994 2 Obtain instructions to submit a property to Form R1 Section 20, 24A, 24C public auction including proposed auction Form R2 (if and 24D advertising and disclosures of Agent benefits applicable) Land and Business (Sale and Conveyancing Act 1994) 3 Freelance Auctioneer Authority to act as an Auctioneer form 4 Before Auction Agent to ensure price Section 21A advertising requirements met Land and Business (Sale and Conveyancing Act 1994) 5 Before Auction Agent to ensure all Form R3 Section 13A prospective purchasers provided with Buyers Land and Business (Sale and Information Notice Conveyancing Act 1994) 6 Contract of sale available three clear Form R3 Auction Section 241 consecutive business days and 30 minutes and R5 Terms & Land and Business (Sale and prior to Auction Conditions Conveyancing Act 1994) 7 Obtain vendor s reserve price in writing Vendor reserve and instruction form 8 Registering of bidders (including Proxy Form R4 Bidder Section 241 Bidders if applicable) and R5 Registration Land and Business (Sale and form Proxy Conveyancing Act 1994) and Bidders Regulations Written Authority form(s) 9 Announcing members of SAA / REISA and Form R5 Auction Section 241/24L other required legislative and other matters terms & Land and Business (Sale and (including collusive practices ) Conditions Conveyancing Act 1994) and Regulations 10 Detail each bid in Auction Record Auction Section 241 Record Land and Business (Sale and Conveyancing Act 1994) and 11 Perform all duties in an ethical, courteous and professional manner Regulations Society of Auctioneers and Appraisers (SA) Inc. Best Practice Procedures 1 of 6
BEST PRACTICE PROCEDURES Public Auction Real Property A.1 Agency Agent 1.1 When obtaining instructions to submit a Property to Public Auction, a Member (being a member of either the Society of Auctioneers and Appraisers and/or the Real Estate Institute of South Australia) should draw attention to the Vendor the Terms and Conditions of the Sales Agency Agreement. A Member must provide to the Vendor a written guide that explains the Vendor s rights and obligations under the agreement via a Form R1. 1.2 At or before the time of signing a Sales Agency Agreement, a Member must deliver to the Vendor a statement in writing of the proposed Auction advertising program including the timing and a close approximate cost of that program so that the Vendor has a clear understanding of the Agent s marketing obligations. A valid Sales Agency Agreement must include the advertising program as well as the following matters: A genuine estimate of the selling price expected by the Member AND a selling price sought or acceptable to the Vendor Clear indication that the method of sale chosen is via auction The duration of the agreement (not exceeding 90 days) Whether the agreement is a sole agency agreement States the vendors rights to terminate the agreement States the nature and source (and if known) the amount or value of any rebates, discounts, refunds or other benefits the Member is expected to receive from a third person in providing the services, and Whether the Member can accept an offer on behalf of the Vendor (before or during the auction process), and if so ensure consumers are made aware of this potential via a warning such as USP (referring to unless sold prior ) in any marketing material. 1.3 At the time of signing a Sales Agency Agreement, a member must determine the GST status of the property in consultation with the Vendor and this status is to be communicated to the auctioneer for public announcement. 1.4 Agent Auctioneers/Registration Card must be carried at all times. B.1 Agency Auctioneer 1.1 If instructed by an Agent as a Freelance Auctioneer, the Auctioneer should accept appointment in writing which confirms the agreed terms and conditions of appointment (SAA and REISA Appointment to act as Auctioneer). A.2 Before the Auction Agent 2.1 A Property must not be advertised as being for sale by Auction and available for inspection unless a valid Sales Agency Agreement is in force. 2.2 A Member must not publish/represent or cause to be published/or represented any advertisement or statement (oral or in writing) concerning a Property proposed for sale by Auction with a price range, unless it is the prescribed minimum advertising price being the greater of the Members estimate of selling price (and the lower estimate of a range if so expressed as a range) or the Vendors acceptable price, as identified in the Sales Agency Agreement. 2.3 it is good practice in order to serve the best interests of the Vendor and the consumer to use reasonable endeavours to obtain details and contact information of interested parties. More importantly, the Member must take all reasonable steps to deliver the prescribed Form R3 (Buyers Information Notice) to every prospective purchaser (and it is recommended that this prescribed form be attached to the promotional material relevant to the property). 2.4 A person who expresses an interest in a Property proposed for sale by Auction and whose contact details are known, should be informed as soon as practicable of any circumstance in which a Property is being considered for sale prior to the proposed Auction, is withdrawn or if the Auction is for some other reason to be postponed or rescheduled. 2.5 A Member must not make any statement relating to a Property or Auction process generally that could reasonably be construed as being misleading, exaggerated or otherwise detrimental to the interests of the Vendor, consumers or the real estate profession. 2.6 Any Member estimate of price expectation provided to a prospective Vendor or Purchaser must be professionally based, having regard to matters such as genuine buyer interest, comparable sales, and prevailing market conditions. 2.7 A Member must not engage in price advertising and/or verbal price estimates, inconsistent with the prescribed minimum advertising price described above. Further, a Member must comply with any other relevant matter such as an applicable Member code of conduct when price advertising. 2.8 if a Member suggests a range to an expected price, any range estimate should reflect the Agent s genuine or expected sale price within the legislative requirement of an upper limit not exceeding 110 percent of the lower limit of the range taking into account market variance, market interest, and be consistent with all legislative requirements when price advertising. Society of Auctioneers and Appraisers (SA) Inc. Best Practice Procedures 2 of 6
2.9 The proposed Contract of Sale together with any documentation required by legislation including Vendors Form 1 Statement, the Buyers Information Notice prescribed document Form R3 and Form R5 must be available for inspection three (3) clear consecutive business days prior to every Auction and copies of such documents must also be on display thirty (30) minutes prior to Auction as prescribed by law. Despite the legislative requirements, it is considered best practice to ensure that all of the required information is available at least five (5) business days in advance of the Auction day. B.2 Before Auction Auctioneer 2.1 Arrive within a reasonable time prior to the commencement of the Auction, prepared and ready to take instructions from the Vendor and Agent (if applicable) and to start the Auction on time. 2.2 Obtain the Vendor s Reserve Price in writing prior to the commencement of an Auction and ensure any variations are noted on the written authorisation, dated and initialled by all Vendors including any adjustments to the Reserve Price. (SAA and REISA Vendor Reserve and Instructions Form). 2.3 Keep the Reserve Price confidential and not reveal it to any party prior to or after the Auction without the Vendor s approval. 2.4 Register all Bidders prior to the Auction (SAA and REISA Bidder s Registration Form) in accordance with the legislation for residential sales (if applicable) and use best endeavours to do similarly for any non-residential sales. Further, ensure that each registered bidder is supplied with Form R4 ( Bidders Guide ) being the prescribed bidders guide to the sale of residential land by auction, as well as Form R5 ( Collusive Practices ). 2.5 Have and be able to demonstrate an understanding of the features and any other relevant information of the Property to be auctioned. B.3 At Auction - Auctioneer 3.1 Perform all duties in an ethical, courteous and professional manner and ensure that all members of staff assisting with the Auction do likewise. Further, the Auctioneer should, at the commencement of the Auction, announce that they are a member of SAA and/or REISA and, announce that the auction is to be conducted under the joint SAA and REISA terms and conditions of sale. 3.2 Audibly advise those in attendance that in accordance with the legislative standard conditions for auctions of residential land (and use best endeavours for auctions for nonresidential land) and other relevant matters, the following information: any person may bid in the auction in person, or by their proxy or representative, subject to the conditions of auction; the vendor s reserve price will be as recorded in the auction record (that is, the property is being offered subject to a Reserve Price); to make a bid a person must be registered in the bidders register, having satisfied the requirements as to proof of identity and, if applicable, authority to bid as a proxy or representative; the auctioneer will only accept a bid if the person making the bid displays an identifying number allocated to the person by the auctioneer; the auctioneer will, when accepting a bid, audibly announce the number so displayed by the bidder; the auctioneer may refuse a bid if of the opinion that it is not in the best interests of the vendor, and will not be obliged to give any reason for refusing a bid; the auctioneer may make bids on behalf of the vendor but not more than 3 such bids and only for amounts below the reserve price; any such bid will be audibly announced by the auctioneer as a vendor s bid ; bidding increments will be accepted at the discretion of the auctioneer; call the bid three (3) times and may, where deemed appropriate, announce that the Property is to be sold upon the Fall of the Hammer when bidding has reached or exceeded the Reserve Price; the person accepted by the auctioneer as having made the highest bid above the reserve price will be the purchaser and that bid will be the purchase price (and accordingly, the Purchaser needs to immediately arrange insurance on the Property to protect their legal equitable interest); the auctioneer will not accept a bid made after the fall of the auctioneer s hammer; unless otherwise agreed in writing by the purchaser and the vendor before the commencement of the auction (i) a contract for the sale of the property, in the form displayed by the auctioneer at the auction (including the settlement date and applicability of GST or otherwise), will be completed and signed by or on behalf of the purchaser and the vendor immediately after the fall of the hammer; and Society of Auctioneers and Appraisers (SA) Inc. Best Practice Procedures 3 of 6
(ii) the purchaser will pay a deposit immediately after the fall of the hammer, as specified in the conditions of auction; the auctioneer will have irrevocable authority, after the fall of the auctioneer s hammer, to complete and sign the contract on behalf of the purchaser or the vendor, or both; completion and signing under that authority will be at the auctioneer s discretion in the event of breach by the purchaser of any of the conditions of auction; the cooling off rights under section 5 of the Land and Business (Sale and Conveyancing) Act 1994 do not apply to a sale by auction or a sale on the day of auction to a person who has made a bid in the auction (whether in person or by their proxy or representative); give notice, by reference to the prescribed Form R5 ( Collusive practices ) as provided and contained in the materials available 30 minutes prior to Auction,that collusive practices at the Auction is illegal; and whether or not the following will apply (optional): that there will be no announcement that the Property is on the market ; and/or that there will be no announcement that the Reserve Price has been reached; and/or that there will or won t be a Vendor conference during the Auction; and/or the Vendor has instructed in the event that the Property is passed in or held over, the highest Bidder shall have the first right to negotiate immediately with the Agent / Auctioneer 3.3 Details of each bid including identifying vendor bids must be recorded within the auction record. 4. Member Professional Standards Agent - Auctioneer A MEMBER MUST: 4.1 Participate in ongoing Auction and Real Estate professional development and have upto- date knowledge of current legislation. 4.2 Act with honesty, integrity and professionalism at all times and in particular when quoting an estimated price range to Vendors, buyers or in the media (as is required by relevant legislation). 4.3 Avoid misleading statements, exaggeration, misrepresentation and comments that are detrimental to the profession when communicating with the media and the public. 4.4 Not disclose any confidential information without the express permission of the Vendor. 4.5 Ensure that the Agent and employees of the Agent do not bid at their Auctions in their own right in the purchase of land that the Agent is commissioned to sell unless exempted under the Land and Business (Sale and Conveyancing) Act 1994. Members should note that the definition of an associate is very broad in the relevant legislation and caution should be exercised at all times to ensure there is no inadvertent breach. 4.6 The Agent and employees of the Agent should ensure prospective Purchasers undertake their own bidding (or bidding through a buyers agent) and not undertake bidding on behalf of any prospective purchaser. The Agent and/or employees should simply, in accordance with best practice, alert the Auctioneer of a bid of a prospective Purchaser. 4.7 Ensure that the Agent commissioned to sell the Property does not accept instructions to bid on behalf of a prospective Purchaser at that Property Auction so as to avoid a conflict of interest. 4.8 Ensure that where a Member intends to bid on behalf of another person (as a buyers agent), they are required to provide a copy of a written authority (SAA and REISA Proxy Bidding Form) to this effect to the Auctioneer prior to the Auction, in accordance with the bidders registration requirements under relevant legislation. 4.9 Ensure that when a person is bidding on behalf of a company, prior to the Auction the person produces suitable written authority in accordance with the bidders registration requirements under relevant legislation. 4.10 When attending an Auction and either bids for a Property personally or on behalf of a prospective Purchaser, will not act in a manner such as to bring into disrepute the practice of sale by Auction or the real estate profession. 4.11 Auctioneers will conduct auctions for registered agents only in order to encourage the greatest level of protection for vendors and consumers alike (both legally and through rules of conduct associated with membership of the Real Estate Institute of South Australia and the Society of Auctioneers and Appraisers). 4.12 Only claim in the newspaper, other publications or media to have sold a Property at Auction unless it is sold under Auction conditions. 4.13 Report Auction sales in the Society of Auctioneers and Appraisers monthly Auction Results Feature in The Advertiser prior to the 7th of each month for the preceding month, and report auction results weekly to the Real Estate Institute of South Australia. Society of Auctioneers and Appraisers (SA) Inc. Best Practice Procedures 4 of 6
Script and Dialogue: Mr & Mrs Vendor would you prefer to have your property sold in 105 days or would less than 40 suit you better. Let me share with you a marketing method that will give you an 87% chance of selling your home in less than 40days. My objective Mr & Mrs Vendor is to place multiple buyers who have an emotional or financial connection to your home in a competitive environment. I will then leverage the situation to achieve the best possible price for you. Mr & Mrs Vendor have you ever sold a property before and what was your experience? Have you got a preference as to which method of sale you would like to use this time? Have any of the other Agents you have spoken to taken the time to explain to you the difference between each method of sale? At ABC Realty we are all about choice, so we don t tell you which method of sale you have to use, we would rather explain to you the distinct differences so that you can make an educated decision as how to how you feel most comfortable, is that OK with you? Be consultative stay neutral! The Auction method of sale is an all embracing marketing method that allows us as your Agent to capture all interested parties. It gives us the opportunity of initially dealing with cash unconditional buyers whilst still retaining those buyers who have a subject sale or need to arrange finance. This then ensures we can ideally affect a sale either before, or at Auction with the best outcome of a cash unconditional contract or secure a conditional contract immediately at the conclusion of the Auction program, conservatively halving days on market for your home. A huge advantage of Auction is that the Vendor becomes a Cash Buyer on the fall of the hammer, where with a conditional contract; the Vendor becomes a cash buyer only when all subject conditions have been met. During the 3 week marketing campaign, invaluable feedback is received by your Agent which will enable you to set the reserve price at an optimum level to achieve the maximum price possible. Society of Auctioneers and Appraisers (SA) Inc. Best Practice Procedures 6 of 6
Public Auction ReAl PRoPeRty THE 21 ADVANTAGES OF USING AUCTION AS YOUR PREFERRED MARKETING PROCESS Why Auction Real estate? Real Estate Auctions have become one of the most popular methods of buying and selling property in Australia with substantial benefits for both Vendors and Purchasers. Auction is used as the preferred method of sale by Beneficiaries, Governments, Banks, Administrators, Executors & Trustee Companies, Corporations and Private Vendors and has been proven to be the best method of establishing true market value. Committed Vendors sell their property by Auction! What is an Auction? AUCTION PUTS THE FOCUS ON YOUR PROPERTY What Are the Advantages To Me as a Vendor? 1. Control, as Vendor you set the terms and conditions. 2. You get a cash unconditional contract, whereas in any other marketing method the purchaser dictates the terms and conditions. 3. 10% deposit on the fall of the hammer. 4. No cooling off period applies. 5. Allows 3 opportunities to sell before, at Auction or immediately after and reduces the overall selling time in the market. 6. Creates a sense of urgency, which motivates purchasers to action. 7. Allows all potential buyers to compete amongst themselves to offer you the best price. 8. Can be used as part of a total marketing package where auction is the component that gets the buyers to act. 9. Price is not disclosed so you remove the ojbection factor. 10. Forces buyers to make decisions to a deadline of the auction date and brings negotiations to a head. 11. The Auctioneer s skills, enthusiasm and techniques can maximise the price. 12. Vendors control their reserve price and settlement date and accept or reject varied terms but get cash contracts, which usually settle in 30 days. 13. Auction is the only method of sale in which the Vendor will negotiate from a position of strength. 14. In every other from of marketing that is available to a Vendor the buyer is in control, not the Vendor. The buyer will dictate the offer, terms, subject to finance, subject to sale, subject to building inspection, cooling off period. The buyer will negotiate from a position of strength. 15. Auction opens the door to more motivated buyers. 16. The Auction marketing campaign that you choose will be tailored to deliver maximum exposure within the first few weeks on the market the time Auction is a frame during which it is most likely to sell. process which h 17. Your home is only open at times that suit you. allows interested ted 18. The level of market interest will help you gauge your reserve price. parties to make competitive 19. The competitive Auction environment offers the greatest chance for a bids which establishes the premium price. current market value of 20. Auction negates the need for commissioner s approval when dealing with the property in an open, associates under legislation saving valuable time. transparent and public 21. Unlike other marketing methods where buyers generally negotiate down from forum utilising the skills of an the asking price, at Auction buyers increase their offers commensurate with experienced Auctioneer. the skills of the Auctioneer. If you e not auctioning your property you are missing out on the highest bid It costs no more to have Auction as part of your marketing strategy