Real estate, used cars, antiques and other products are often sold at auctions. Your rights depend on whether the seller is a trader and if the goods are new or second-hand.
How it works
An auction has a special meaning under the Auctioneers Act as a process where:
- products or real estate are offered for sale by an auctioneer on behalf of a vendor
- people bid against each other in real time — in person, by phone or by internet live streaming
- the auctioneer says when the product or real estate are sold.
Online bidding sites like Trade Me aren't auctions
Sites like Trade Me or eBay are not technically auctions, because items are sold directly by a seller to a winning bidder without using an auctioneer. Your rights on these sites depend on who you are buying from.
If you buy from someone in the business of selling things (a trader), your rights are the same as if you bought from a shop.
If you buy from anyone who is not a trader, this is a private sale. The Consumer Guarantees Act and Fair Trading Act don't apply. If something goes wrong, you can use the site's disputes process.
Filing a dispute report(external link) — Trade Me
Before you buy at auction
Before you bid, it's a good idea to do some research. Look at the property or goods before they go up for auction. Auction houses often have inspection days before the auction, or catalogues of items to be sold. You can also have a look at the goods on auction day, just before the auction starts.
You should also:
- Try to get an idea of how much the goods are worth, and decide how much you are willing to pay.
- Check the terms of sale before the auction starts, or at the time of sale.
- Check the auctioneer is registered.
- Know the rules for vendor bids.
If you have never bought at an auction before, try going to one just to observe before you attend as a bidder.
Your rights when buying at auction
An auction sale is a contract.
An auction starts when the auctioneer invites the first bid and ends when the auctioneer makes it clear that bidding is closed. A bid can be withdrawn before the end of the auction for that item.
If your bid is the final bid and it is accepted by the auctioneer then you have entered into a legal agreement to buy the goods, even though there may be no written agreement yet.
When the seller is a trader
When you buy new or second-hand products at auction from a trader, you have the same rights under the Consumer Guarantees Act (CGA) as when you buy from a shop.
Traders who are selling products at auction must identify themselves as being in trade, so that consumers will know they are covered by the Fair Trading Act and the Consumer Guarantees Act.
Keep in mind, second-hand products are more likely to show signs of use and may not last as well as new products.
When the seller isn't a trader
If the seller is not a trader then it is a private sale and you don't have as much protection. The seller must have good title (the right to sell the products they are selling), the goods must match the description, and the seller must not mislead you into buying the goods.
Private sales and second-hand goods
What auctioneers must do
There are rules in the Fair Trading Act about how an auction can be conducted lawfully by an auctioneer.
- be registered as an auctioneer, unless they're a real estate agent or a car dealer
- make a notice of the auction terms available before the auction, eg on their website
- pay the auction proceeds to the seller within 10 working days after the auction, unless the auction was for land.
The auctioneer cannot accept vendor bids (bids by the vendor or any person acting as an agent for the vendor, usually the auctioneer) unless:
- the terms of the auction say that vendor bids are permitted
- the auctioneer clearly identifies each vendor bid
- a reserve price has been set and the vendor bid is less than the reserve price.
Auctioneers must not mislead or deceive you about the service they offer or the products for sale.
Check if an auctioneer is registered(external link) — Trading Standards
Terms of sale
An auction house will ask you to register and sign their written terms of sale if you plan to bid.
The terms of sale must be easily available for you to view before and during the auction. The terms must tell you:
- if a reserve price applies
- whether vendor bids are accepted
- if the vendor is in trade
The terms of sale can include other conditions too. Watch out for conditions like:
- the goods must be collected on the same day
- payment must be in cash or by bank cheque
- the buyer must pay a percentage of the sale price to the auction house (this is called a “buyer's premium”).
After the auction
Within 10 working days of the auction (or five working days if the seller asks for it), the auctioneer must give the seller the money from the sale minus auction costs and fees, and details about:
- the winning bid
- the amount of any tax
- the auctioneer’s commission or other deductions
- the net amount payable to the seller.
The auctioneer doesn't have to do this if:
- the seller is in trade and they agree that these requirements don't need to apply
- the seller is selling goods that are not normally bought for personal, domestic, or household use or consumption, and they agree that these requirements don't need to apply
- the auction was for land or an interest in land and was conducted by a licensed real estate agent — the rules in the Real Estate Agents Act apply instead.
Buying and selling at auction(external link) — Commerce Commission
Example — Binding contract
Max is at a household auction and wins the bid for a used lawn mower. He changes his mind after he has won the bid and the hammer has fallen on that auction item. It is too late to cancel the sale as he has entered a binding contract and will have to pay for the motor mower.
Example — Vendor’s bid
Janet is at a real estate auction. The real estate agent who is running the auction is doing so on behalf of the bank for a mortgagee auction. Janet is bidding for the property below the reserve price. The auctioneer increases the bid above the reserve price by stating “the bid is with me” on behalf of the bank. In the auction’s terms and conditions it is clearly stated the auctioneer will be able to make a vendor’s bid. However it is illegal to make a vendor’s bid above the reserve price so Janet can complain to the Real Estate Agents Authority to investigate.
Example — Misrepresentation
Erena buys antique jewellery from a second-hand dealer’s auction and later gets the jewellery valued for insurance purposes. She finds out the jewellery is not actually antique and is fake. As the jewellery doesn't match its description, she contacts the auction house to ask for a full refund. But they don't take her complaint seriously. Erena can now take her complaint to the Auctioneers Association. If she still doesn't get a refund, she can go to the Disputes Tribunal.
If things go wrong
If you're having problems with an auction/auctioneer first:
Complain directly to the auctioneer if:
- products were damaged under their control
- they misled you about the products
- they did not follow the auction rules, eg they made vendor bids.
Complain directly to the seller if you think the products are faulty as soon as you discover a problem. Explain what the problem is and how you would like it to be resolved.
If the problem is minor, the seller can choose to repair, replace or refund your money — provided they are still in business. If the problem is serious — or they fail to act or can't fix it — you can reject the products and ask for a full refund.
If the seller is not in business, you will have to rely on the Contract and Commercial Law Act to cancel the contract and get your money back.
If you can’t agree on a solution directly with the auctioneer or retailer, there are disputes options available to you through either the:
- Disputes Tribunal — if your claim is up to $30,000
- District Court — if your claim is between $30,000 and $350,000
Complain to the Commerce Commission if think you have been misled about something you have bought from a professional trader at auction.
The Commerce Commission enforces the Fair Trading Act, which protects you against being misled or treated unfairly by traders or shops, eg being told something is in good working order when it is not, or does something it doesn't.
The Fair Trading Act does not apply to private sales, eg a person selling on Trade Me who does not sell there as a business.
Commerce Commission doesn't act on behalf of individuals and can't investigate every complaint. But their investigations do help make sure businesses are complying with the law. Your information helps them assess which consumer issues are causing greatest harm.
Buying and selling at action fact sheet [PDF 555 KB](external link) — Commerce Commission
Make a complaint(external link) — Commerce Commission
Report your auctioneer
You can complain about your auctioneer and their:
- unethical behaviour, eg telling the buyer or seller details about the other without permission
- bad service
- poor advice, eg they gave an opinion on the value of an item without any evidence or research
- handling of the financial side of the auction.
For complaints against Auctioneer's Association members it is free. For complaints about non-members, there is a small cost. Complain in writing to the Auctioneer's Association through their online contact form, or by email.
Complaints(external link) — Auctioneer's Association
Get support at any point from:
- Citizens Advice Bureau (CAB) — this is a free, independent service, run by volunteers. CAB can advise you on your consumer rights and obligations, in person, by phone, or online.
- Community Law Centre — this service offers free one-on-one legal advice to people with limited finances. The organisation has 24 community law centres throughout the country. You can find legal information and other resources on its website.
Find a CAB(external link) — Citizens Advice Bureau
Our law centres(external link) — Community Law Centres