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
Private sales and second-hand goods
Before you buy at auction
Before you bid, it's a good idea to do some research. Take a 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 A bid can be withdrawn before the end of the auction for that item.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:
- what the reserve price is
- 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