If you are the highest bidder and the reserve is not met, the property is 'passed in' to you and you get first right to negotiate directly with the seller. It is actually one of the strongest positions a buyer can be in on auction day.
What does 'passed in' mean?
Every auction has a reserve price. That is the minimum the seller has told the auctioneer they will accept. If the top bid does not reach the reserve, the auctioneer stops the auction and 'passes in' the property to the highest bidder. No sale has been made yet, but the highest bidder is now in an exclusive negotiation.
Why is being passed in a good position for the buyer?
Two reasons. First, you now know exactly what the top of the buyer market was willing to pay today, because you were it. Second, you get an exclusive window (usually 15 to 30 minutes in a private room) to negotiate with the vendor before the property goes back on the market to anyone else. Everyone else has to wait.
You have leverage the vendor does not have. They committed to selling at auction. They have marketed. They have paid the auctioneer. If you walk, they are back to square one.
What happens in the negotiation room?
The agent takes you into a room and shows you the reserve, or a revised one. You can:
- Match the reserve and buy the property. - Offer somewhere between your bid and the reserve. - Walk away and let it go back on the market as a private treaty listing.
The agent works for the vendor, but the good ones know a passed-in sale in the room is better for everyone than a stale listing.
Should I automatically pay the reserve?
No. Bid what the property is worth to you. If the reserve is $50,000 above your top bid, ask why, and consider offering half the gap. Many passed-in properties sell in the room at a number below the original reserve because the vendor sees the reality of where the market landed.
What if I walk away?
The property goes on the market at an asking price, usually the reserve or slightly above. You can still make an offer later, but you have lost the exclusive negotiation. Sometimes it comes back to you cheaper a few weeks in. Sometimes another buyer comes forward and pays over your top bid. It happens both ways.
Is a passed-in contract still unconditional?
Yes. Any sale made within two clear business days of the auction is treated as an auction sale in Queensland. That means no cooling off, and finance and building and pest need to have been sorted before you bid. Detail on the cooling-off exclusion is in Cooling-off periods in Queensland.
For the seller's view of being passed in, read /blog/what-happens-if-your-property-is-passed-in-at-auction. It is useful to understand both sides. Auction mechanics generally are covered in how to bid at auction.
What should you do next?
Have a look at what is currently for sale on Brisbane's south side over on /properties, or send me a buying question and I will give you a straight answer.
If you will be selling a home to buy your next one, find out what yours is worth with a free, no-obligation appraisal. That number is often the missing piece that turns a wish list into a real plan.
Frequently asked questions
Ready to have a proper look at the market?
Browse current listings, or ask Junaid a buying question and get a straight answer from someone who works the south side every day.
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