In short: When the hammer falls at a Victorian auction you have bought the property unconditionally: no cooling-off, no subject-to-finance clause, and a deposit (usually 10%) due on the day. Before you raise your hand you need a pre-approval that has been checked against this specific property, a plan for a low valuation, your deposit ready in accessible funds, and the Section 32 reviewed by your conveyancer.
Key takeaways
- There is no cooling-off period at a publicly advertised auction, or within three clear business days before or after it.
- Pre-approval is not unconditional approval; the lender still needs to value the property and verify your documents after you win.
- A valuation below the hammer price reduces your loan, and you must cover the gap.
- The deposit is payable on auction day, usually 10%, by bank cheque, transfer or an approved deposit bond.
- Failing to settle means losing the deposit and potentially being sued for the vendor's loss on resale.
Auctions are the default sale method for established homes across much of Melbourne, from Reservoir and Preston to Greenvale, and the rules in Victoria are unforgiving. A private-sale buyer who discovers a finance problem can often walk away. An auction buyer cannot. This checklist is the one we run with clients in the fortnight before they bid, and it is written from the finance side because that is where most auction disasters start.
What makes auctions different
Victoria's cooling-off rules give private-sale buyers three clear business days to withdraw from a signed contract for a penalty of $100 or 0.2% of the price, whichever is greater. That right does not exist for auction sales, and it is also removed for contracts signed within three clear business days either side of a publicly advertised auction, which catches pre-auction offers and post-auction negotiations too. The detail is in cooling-off period in Victoria and on the Consumer Affairs Victoria website.
Auction contracts are also sold unconditionally. You cannot insert a subject-to-finance clause or a building inspection condition after the hammer. Everything that would normally be a condition has to be done beforehand.
The checklist
1. Get a pre-approval, then get it checked against the property
A pre-approval tells you the lender is willing to lend up to a figure subject to a valuation and final verification. Two weeks before the auction, send your broker the property address and the Section 32. We check that the property type, size, location and title are within the lender's policy, that your maximum bid keeps the loan within your approved limit and LVR, and that the pre-approval will still be current at settlement. A pre-approval given for "a house in the north up to $700,000" is not the same as one checked against 12 Example Street.
2. Plan for a low valuation
The lender's valuer does not care what the auction crowd paid. If you win at $720,000 and the valuation comes back at $690,000, the lender lends against $690,000. At 90% LVR your loan drops from $648,000 to $621,000 and you need another $27,000 in cash. Auctions in a rising market produce this outcome regularly; test the effect with the LVR calculator. Your protection is headroom: bid to a figure where you could absorb a valuation 3% to 5% below your bid, or have a guarantor or extra savings available. Some lenders will do an upfront valuation before auction, which removes most of the uncertainty; ask.
3. Have the deposit ready on the day
The contract will state the deposit, commonly 10% of the price, payable immediately after the auction. On a $700,000 purchase that is $70,000, on top of the duty and fees in the upfront costs calculator. Agents accept bank cheques and, increasingly, electronic transfer, but daily transfer limits on your bank account can stop a same-day payment; raise your limit in advance. If your deposit is tied up in shares, a term deposit or another property, a deposit bond may be accepted, but only if the vendor agrees before the auction, so arrange it early. Some vendors will negotiate a 5% deposit if asked before bidding, never after.
4. Review the Section 32 with your conveyancer
The Section 32 vendor statement discloses title, mortgages, easements, planning overlays, owners corporation details and building permits. Have your conveyancer review it at least a week out. An unapproved extension or an owners corporation special levy is something you want to know before bidding, not after. This is also when you should have the building and pest inspection done; at auction you inspect before, not after, and you pay for it whether or not you win.
5. Confirm settlement terms suit your lender
Auction contracts typically specify settlement at 30, 60 or 90 days. Short settlements leave little room if your lender is slow; long ones can outlast your pre-approval. Check both, and if you want a different settlement period, ask the agent before the auction whether the vendor will agree. Settlement mechanics are in the settlement process in Victoria.
6. Check the guide price against the rules
Victoria's underquoting laws, enforced by Consumer Affairs Victoria, require agents to provide a Statement of Information with an indicative selling price that is not less than their estimate or the vendor's asking price. If comparable sales in the statement are well above the guide, expect the result to be too. Set your limit on comparable sales, not the guide.
7. Set a walk-away price and register it with someone
Write down your maximum, which should be below your absolute finance ceiling, and tell your partner, broker or a friend who will be with you. Auctions are designed to make you exceed it. If you cannot trust yourself, a buyer's advocate can bid for you.
The two-week countdown
| When | Task |
|---|---|
| 14 days out | Send address and Section 32 to your broker and conveyancer |
| 10 days out | Building and pest inspection booked and completed |
| 7 days out | Conveyancer's Section 32 review received; deposit bond arranged if needed |
| 5 days out | Broker confirms pre-approval covers this property and your maximum bid |
| 3 days out | Deposit funds accessible; transfer limits raised; bank cheque ordered if required |
| Auction day | Registration, ID, deposit ready, maximum written down |
| Day after | Contract and deposit receipt to broker; formal approval lodged |
If it goes wrong
If you win and your finance fails, you are still bound. The vendor can keep your deposit and sue for the shortfall if the property resells for less. What happens if finance falls through sets out your limited options, which mostly involve finding alternative funding fast: another lender, a guarantor, a bridging arrangement or family help. That is why the checklist front-loads the finance work.
The buying at auction in Victoria guide covers bidding tactics and what happens if the property passes in, where you often get the first right to negotiate.
Frequently asked questions
Can I make an offer before the auction with a finance clause?
You can make a pre-auction offer, but if it is accepted within three clear business days of the advertised auction there is still no cooling-off, and vendors selling by auction generally refuse conditional offers. Some will accept a subject-to-finance offer if it is strong and made early. Your conveyancer can draft it so the finance clause is watertight.
What is unconditional approval and can I get it before the auction?
Unconditional (formal) approval is the lender's binding commitment to fund a specific loan on a specific property. Because it requires a valuation and contract, most lenders issue it only after you have bought. Some will complete the valuation before auction if you pay for it, which gives you close to unconditional certainty before you bid. Ask your broker which lenders offer this.
What happens if the property passes in?
If bidding does not reach the reserve, the property is passed in, and the highest bidder usually gets the first chance to negotiate with the vendor immediately afterwards. A contract signed in that negotiation on auction day still has no cooling-off. Your walk-away price should apply in the negotiation just as it did in the bidding.
Can a first home buyer use the First Home Guarantee at auction?
Yes. The Guarantee affects your deposit and LMI, not the sale method. You need a pre-approval with a participating lender that reserves your place in the scheme, the property must be under the $950,000 Melbourne cap, and you must be able to pay the contract deposit on the day, which may be more than your 5% if the contract specifies 10%. See the First Home Guarantee guide and our first home buyer loans page.
Talk to GNT Finance
Send us the address of the property you want to bid on and we will run the checklist with you before auction day, from our office in Mickleham or by video. Book a free consultation or call Gorakh Timilsina on 0426 403 703. There is no cost to you for our home-loan service in most cases.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.