Information Centre · Property & Conveyancing
Selling Property at Auction in Victoria: A Vendor's Legal Guide
Selling property at auction in Victoria is a legally- structured event with strict pre-auction preparation requirements. This vendor-focused guide covers section 32 preparation, contract finalisation, reserve, vendor bids, deposit, cooling-off, passed-in negotiation and settlement for Victorian residential and small-commercial auctions.
Key points
- Auction sales in Victoria are governed by the Sale of Land Act 1962 (Vic), the Estate Agents Act 1980 (Vic) and the Estate Agents (General, Accounts and Audit) Regulations 2018 — the vendor's statement (section 32), the contract of sale and the auction rules must all be finalised and available for public inspection at least three clear business days before auction.
- There is no cooling-off period for a sale by auction or for a private sale signed within three business days before or after an advertised auction — the successful bidder is bound at the fall of the hammer, which makes vendor preparation of the section 32 and contract critical.
- Vendor bids are permitted at auction only when the auctioneer clearly announces them as vendor bids at the time — undisclosed 'dummy bidding' is prohibited under section 6A of the Sale of Land Act with substantial penalties for the vendor, the agent and the auctioneer.
- The reserve price is a private instruction between vendor and auctioneer — if bidding does not reach reserve the property is 'passed in', and the highest bidder is typically offered the first right to negotiate at the reserve; a well-drafted post-auction contract avoids the common mistake of resetting all the terms.
- Deposit is usually 10% of the purchase price, payable on the fall of the hammer; deposit release under section 27 of the Sale of Land Act is only available where settlement is more than 28 days away and the vendor complies with the strict release notice requirements.
- Vendor obligations continue after auction — cooperation with the buyer's PEXA workspace under the Electronic Conveyancing National Law, clearance of caveats and mortgages, adjustments for rates, land tax and owners corporation levies, and property condition at settlement all sit with the vendor and its conveyancer.
Auction is a distinctive Victorian selling method, and from a vendor legal perspective it is a compressed and inflexible one. Once the auction is called there is no cooling-off period, limited scope to negotiate contract variations, and no opportunity to fix a defective section 32 without offering the purchaser a right to walk away. The vendor's legal preparation is essentially complete before the auctioneer arrives.
This article is a practical vendor-focused guide to selling residential and small commercial property at auction in Victoria. For the buyer-side view see our buying property at auction in Victoria guide. For general vendor-side conveyancing across auction and private sale, see our selling property in Victoria guide. This article is general information only and is not legal advice.
The Legal Framework
Auction sales in Victoria are governed by three principal statutes:
- Sale of Land Act 1962 (Vic) — vendor statement (section 32), cooling-off exclusion for auction (section 31), prohibition on dummy bidding (section 6A), deposit release (section 27).
- Estate Agents Act 1980 (Vic) — agent conduct, agent authority, vendor bid disclosure (section 43), deposit handling in the agent's statutory trust account.
- Estate Agents (General, Accounts and Audit) Regulations 2018 — auction rules, agent record-keeping, trust account handling.
The Retail Leases Act 2003 (Vic) and Owners Corporations Act 2006 (Vic) apply to specific property types. The Sale of Land Amendment Act 2019 (Vic) reforms (particularly the prohibition on sunset-clause exit for off-the-plan vendors) apply to residential off-the-plan sales; auction of completed dwellings is not affected.
Section 32: The First Document Ready
Section 32 of the Sale of Land Act 1962 (Vic) requires the vendor to give the purchaser a signed vendor statement before the purchaser signs any contract of sale. For auction sales the vendor statement must be available for inspection with the contract for three clear business days before the auction. In practice the vendor's conveyancer prepares the section 32 at the same time as the listing agent is engaged, and updates it if any material change occurs during the marketing campaign.
A compliant vendor statement typically includes: title search and registered plan; planning certificate and zoning; rates, land tax and other outgoings; building approvals and any current notices or orders; owners corporation records where applicable; any easements, covenants or caveats affecting the land; and specific disclosures about the vendor's mortgage and any GAIC (growth areas infrastructure contribution) liability. See our companion section 32 vendor statements guide for the drafting detail. A defective section 32 gives the purchaser a right to rescind at any time before settlement — the single most common cause of post- auction dispute.
The Contract of Sale
The contract of sale is finalised by the vendor's conveyancer before the auction and is made available for public inspection alongside the section 32. Special conditions typically address:
- the deposit (usually 10%, immediately payable at the fall of the hammer);
- the settlement period (usually 30, 60 or 90 days from the auction date);
- adjustments for rates, land tax, water and owners corporation levies;
- vacant possession or subject to existing tenancy;
- inclusions and exclusions (fixtures, chattels);
- vendor bid authority (permitting the auctioneer to make bids on behalf of the vendor);
- PEXA electronic settlement provisions (see our companion PEXA guide);
- GST clauses where the sale is subject to GST (some vacant land, new residential, commercial).
The Reserve Price
The reserve is set by the vendor on advice from the selling agent, informed by comparable sales, market feedback from the marketing campaign and pre-auction interest. It is a private instruction between the vendor and auctioneer — not disclosed to bidders. Best practice is a written reserve instruction letter signed by the vendor on the day of the auction; this protects the vendor and the agent from later disputes about what the reserve was.
During the auction, once the reserve is met the auctioneer announces the property is 'on the market' and the highest bidder at the fall of the hammer is the buyer.
Vendor Bids and Dummy Bidding
Section 43 of the Estate Agents Act 1980 (Vic) permits the auctioneer to make vendor bids on behalf of the vendor provided each vendor bid is clearly announced at the time it is made — typically 'vendor bid $X'. Vendor bids are commonly used at the start of the auction, to move a slow auction forward, and to move a stalled auction toward the reserve.
Undisclosed vendor bids and third-party dummy bids are prohibited under section 6A of the Sale of Land Act 1962 (Vic) and carry substantial penalties for the vendor, the agent and the auctioneer. Vendors must expressly authorise vendor bids in advance; agents must be able to demonstrate that authority.
No Cooling-Off at Auction
Section 31 of the Sale of Land Act 1962 (Vic) provides a three-business-day cooling-off period for residential private sales — but expressly excludes:
- sales by auction;
- sales within three business days before the advertised auction (a 'shortstop' pre-auction sale);
- sales within three business days after the auction (typically the passed-in negotiation);
- sales where the purchaser is an estate agent or corporate purchaser above defined value thresholds.
The successful bidder at auction is bound at the fall of the hammer with no right to change their mind. See our companion cooling-off rights guide for the private-sale framework.
Deposit
The standard Victorian auction deposit is 10% of the purchase price, payable immediately on the fall of the hammer. The deposit is held by the vendor's estate agent in the agent's statutory trust account under Part 6 of the Estate Agents Act 1980 (Vic). Some contracts allow a smaller initial deposit (typically 5%) with the balance in a defined period — this must be provided for in the contract before the auction.
Under section 27 of the Sale of Land Act 1962 (Vic) the vendor can seek release of the deposit before settlement, but only where settlement is more than 28 days away, the contract is unconditional, and the purchaser has been served with a compliant section 27 statement disclosing vendor mortgages and unpaid land tax. The purchaser has 28 days after service to object; without objection the deposit is released.
If the Property Is Passed In
If the highest bid is below the reserve the property is passed in. The highest bidder is typically offered the first right to negotiate with the vendor immediately after the auction at the reserve price. A well-drafted post-auction contract uses the same terms and section 32 as the auction contract, with the price set at the negotiated figure. Post-auction negotiation signed within three business days of the auction has no cooling-off; a contract signed more than three business days later is a private sale for cooling-off purposes.
Settlement
Settlement is typically 30, 60 or 90 days after auction depending on the vendor's timing and the special conditions. Settlement is now overwhelmingly conducted electronically through PEXA under the Electronic Conveyancing National Law (Victoria). See our companion PEXA electronic conveyancing guide for the mechanics.
Vendor obligations to settlement include: mortgage discharge coordination with the vendor's bank; caveat removal where applicable; adjustments for rates, land tax, water and owners corporation levies calculated to settlement; PEXA workspace configuration; and property handover in the condition warranted in the contract. See our companion property settlement adjustments guide for the calculation detail.
Land Tax and Adjustments
Land tax adjustments are among the most commonly disputed adjustments in Victorian settlement. Vendors selling investment property must consider whether the liability for land tax is passed to the purchaser or adjusted at settlement — the special conditions of the standard contract typically provide for the purchaser to reimburse the vendor for land tax to settlement based on the current-year assessment. Absentee-owner surcharges add further complexity for foreign vendors; see our companion absentee owner surcharge guide.
Common Vendor Mistakes
- Late section 32 preparation — vendor statement finalised only days before the auction, missing attachments or containing errors that give the purchaser a rescission right.
- Unclear reserve instructions — verbal-only reserve instructions that lead to disputes about whether the property was 'on the market' when knocked down.
- Unannounced vendor bids — vendor bids made but not clearly identified as vendor bids, exposing the vendor to section 6A penalties.
- Post-auction contract changes — trying to renegotiate contract terms after the hammer has fallen; the successful bidder is bound to the auction contract as advertised.
- Mortgage discharge delay — failure to give the vendor's bank sufficient notice to prepare the discharge for the settlement date, causing vendor default.
Related Guides
See our companion articles on selling property in Victoria (general vendor guide), section 32 vendor statements, stamp duty and land transfer duty and PEXA electronic conveyancing.
Frequently Asked Questions
Do I need a section 32 vendor statement for an auction?
Yes. Section 32 of the Sale of Land Act 1962 (Vic) requires the vendor to give the purchaser a signed vendor statement before the purchaser signs any contract of sale. For an auction sale the vendor statement must be available for inspection with the contract for three clear business days before the auction — practical practice is to have it ready when the property is first advertised. Failure to comply gives the purchaser a right to rescind at any time before settlement; a defective section 32 is the single most common cause of post-auction disputes.
Can a buyer at auction cool off?
No. Section 31 of the Sale of Land Act 1962 (Vic) expressly excludes the three-business-day cooling-off period for sales by auction and for sales made within three business days before or after an auction. The successful bidder is bound at the fall of the hammer with no right to change their mind. This is why the vendor's section 32 and contract must be final and defensible before the auction — the buyer has no post-auction opportunity to reconsider.
How is the reserve price set and communicated?
The reserve is a private instruction between vendor and auctioneer, set in writing at or shortly before the auction. Reserve setting typically involves a market update from the selling agent, comparable-sales analysis, discussion of buyer feedback from the marketing campaign, and — increasingly — a formal reserve instruction letter for later reference if bidding falls short. The reserve is not disclosed to bidders. Once the reserve is met the auctioneer announces the property is 'on the market' and the highest bidder at the fall of the hammer is the buyer.
Are vendor bids allowed?
Yes, but only if properly announced. Section 43 of the Estate Agents Act 1980 (Vic) allows the auctioneer to make vendor bids on behalf of the vendor provided each vendor bid is clearly announced at the time it is made — typically 'vendor bid $X'. Undisclosed vendor bids ('dummy bids') and third-party dummy bids are prohibited under section 6A of the Sale of Land Act 1962 (Vic) and carry substantial penalties for the vendor, the agent and the auctioneer. Vendor bids are commonly used to move the auction to the reserve.
What happens if the property is 'passed in'?
If the highest bid is below the reserve the property is 'passed in' — no sale occurs at the auction. The highest bidder is typically offered the first right to negotiate with the vendor immediately after the auction at the reserve price. A well-drafted post-auction contract uses the same terms and section 32 as the auction contract, with the price set at the negotiated figure. A property that is 'passed in and negotiated after auction' is treated as a private sale for cooling-off purposes only if signed more than three business days after the auction (section 31).
How much deposit is payable and when?
The standard Victorian auction deposit is 10% of the purchase price, payable immediately on the fall of the hammer. Some contracts allow a smaller deposit (typically 5%) with the balance in a defined period, but this must be provided for in the contract of sale before the auction. Deposit is held by the vendor's estate agent in the agent's statutory trust account under Part 6 of the Estate Agents Act 1980 (Vic) until released to the vendor at settlement (or earlier under a compliant section 27 deposit release).
Can the vendor release the deposit before settlement?
Yes, under section 27 of the Sale of Land Act 1962 (Vic) — but only where settlement is more than 28 days away, the contract is unconditional, and the purchaser has been served with a compliant section 27 statement disclosing the vendor's mortgages and unpaid land tax. The purchaser has 28 days after service to object; if no objection is made the deposit is released. Deposit release notices are strict form and must be prepared by the vendor's conveyancer, not the agent.
What is a vendor's warranty in the contract of sale?
General condition and special condition warranties in the standard Victorian contract of sale cover matters like title, unencumbered ownership, building approvals, absence of undisclosed notices and orders, and compliance with the vendor statement. Vendors selling at auction should ensure the special conditions do not add warranties beyond what the property can actually support. Where a warranty is later shown to be untrue, the purchaser may have rights to rescind, sue for damages or make claim on the deposit at settlement.
What documents must be finalised before auction day?
Before the property is first advertised: contract of sale (with all special conditions and vendor bid provisions); section 32 vendor statement with all attachments (title, planning, rates, land tax, building approvals, owners corporation records if applicable); a signed authority to sell to the estate agent; reserve instruction letter; and PPSR / mortgage discharge arrangements with the vendor's bank. Section 32 and contract must be available for public inspection at the auction and for three clear business days before it.
Who signs the contract at the auction?
The successful bidder signs the contract immediately at the fall of the hammer. The vendor's agent typically holds the vendor's signature by prior instruction or the vendor signs on the day. The auctioneer or another representative of the agent completes the contract particulars — purchaser name, purchase price, deposit received. The signed contract, together with a stamped and dated section 32, forms the binding sale. The vendor's conveyancer receives a copy immediately and manages the balance of the transaction to settlement.
Property & Conveyancing
Vendor auction preparation is complete before the hammer.
Parke Lawyers prepares Victorian auction section 32 vendor statements, contracts of sale and settlement documentation so vendors go to auction with a defensible package — and settle without dispute.
This article is general information only and does not constitute legal advice. Please obtain advice tailored to your circumstances.