What happens when a Sydney property is passed in at auction?

Summary

When a Sydney property is passed in at auction, bidding has not reached the seller’s reserve and the property remains unsold. The highest bidder will generally have the first opportunity to negotiate with the seller. This does not mean they must buy or that the seller must accept their offer. The buyer should reassess the property’s value, confirm the proposed terms and understand the cooling off position before exchanging contracts.

Passed in does not mean purchased

Before an auction, the seller sets a reserve price. If bidding does not reach that figure and the seller will not accept a lower amount, the property may be passed in.

Current NSW Government auction guidance states that the highest bidder generally receives the first opportunity to negotiate with the seller.

Being the highest bidder does not automatically make you the purchaser. The property was not sold under the hammer, and the parties still need to agree on price and terms before exchanging contracts.

Treat it as a new negotiation

Once the auction ends, the process changes from public bidding to private negotiation.

Ask what price the seller will now consider, whether they expect an immediate exchange and whether other interested buyers may be approached. The seller’s reserve provides information about their expectations, but it is not independent evidence of value.

The highest bid provides another piece of evidence. It shows where bidding stopped on that day. It does not prove the property is worth the seller’s preferred figure.

Our Sydney buying service includes property assessment and negotiation for Australian expats purchasing from overseas.

Keep your price limit separate from the reserve

Decide your maximum price using comparable sales, the property’s condition and how well it meets your brief.

Do not increase your limit simply because the reserve was higher. Equally, do not assume that a passed in property must now sell below market value.

Price is only one part of the negotiation. Settlement timing, deposit arrangements, inclusions and proposed contract changes may also matter. Your property lawyer should review any change before you agree to exchange.

Overseas buyers need clear authority

A post auction negotiation can move quickly. Buyers in Singapore, London or New York may not be available when the selling agent seeks a response.

Before the auction, decide what your local representative can communicate, the maximum price they can negotiate and which terms require further approval.

Also confirm how the deposit will be paid and who can sign or arrange exchange. Our key partners page explains the different roles of legal and finance advisers around an overseas purchase.

Check the cooling off position before agreeing

NSW Government guidance says a cooling off period does not apply when contracts are exchanged on the same day as the auction after the property has been passed in.

Different arrangements may apply if contracts are exchanged later, or if cooling off rights are waived. Ask your solicitor or conveyancer to explain the position before you commit. Do not assume that a failed auction gives you extra time to reconsider.

The practical lesson from Dover Heights

Our work in Dover Heights has included negotiation after an auction.

The practical lesson is that the end of bidding does not end the buying opportunity. It changes the format. The strongest position comes from knowing the property’s value, understanding the contract and having authority to act without allowing the seller’s reserve to become your price.

Discuss a post auction opportunity with us

If a Sydney property has passed in and you are considering the next step from overseas, chat with us about the opportunity. We can assess the property, clarify the negotiation process and help you decide whether to proceed.

Frequently asked questions

Does the highest bidder have to buy a passed in property?

No. The property was not sold under the hammer. The highest bidder may negotiate, but a purchase still depends on the parties agreeing and exchanging contracts.

Can another buyer purchase the property afterward?

Yes. The highest bidder generally receives the first opportunity to negotiate, but that does not guarantee an exclusive negotiation or prevent the seller from considering another buyer.

Is there a cooling off period after a passed in auction?

Not if contracts are exchanged on the same day as the auction. If exchange occurs later, ask your solicitor or conveyancer what rights apply to the proposed contract.