Special rules for auctions
Auctions can be a very popular way to buy or sell second-hand products such as cars, antiques or real estate.
An auction has a special meaning under the Auctioneers Act as a process where:
- products and services 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 products, service or real estate are sold.
Under the Fair Trading Act, you are protected by special rules for auctions conducted by auctioneers. This includes rules for vendor bids. Vendor bids are bids made on behalf of the vendor by the auctioneer or an agent. An auctioneer can only accept vendor bids where:
- the notice of auction terms specifies that vendor bids are permitted for that lot
- the auctioneer clearly identifies each vendor bid, eg ‘seller is bidding’ or ‘vendor bid’
- a reserve price is set and the vendor bid is below the reserve price.
Before you bid make sure you:
- examine any products or real estate before you bid at inspection days before the auction
- decide on your upper spending limit so you don't bid more than you want to spend
- 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.
Online and charity auctions have different rules
However, online auctions like Trade Me are not covered by the Auctioneers Act or the specific rules in the Fair Trading Act that apply to auctions, as there is no auctioneer controlling the bidding. Charity auctions are also not included, as there is usually no fee or commission paid to the auctioneer.
How auctions work
An auction house will ask you to register and sign their written terms of sale if you plan to bid. These terms must be easily available for you to view before and during the auction. The terms must tell you:
- how you can pay
- what the reserve price is
- whether vendor bids are accepted
- if the vendor is in trade.
The auction starts when the auctioneer invites the first bid (offer). You bid, stating the price you want to pay, in person at the auction or by phone. You can withdraw a bid at any time before the end of the auction for that item. The sale is complete when the auctioneer indicates the end of the sale, such as with the fall of a hammer. This is an agreement to buy the item, so you can’t change your mind.
See Buying and selling at auction(external link) on the Commerce Commission’s website to find out more.