What First Home Buyers Need to Know When Considering Buying at Auction

For many first home buyers, the thought of buying a property at auction can be both thrilling and intimidating. Unlike a standard property purchase, auctions in New Zealand operate under a unique set of rules where the highest bid wins — and once the hammer falls, you’re legally committed to the purchase. There’s no room for negotiation, no cooling-off period, and no chance to make your offer subject to conditions. This makes it essential to be fully prepared before stepping into the auction room.

Understanding how auctions work, what you’ll need in place beforehand, and the risks involved is crucial to ensuring your first home buying journey is a success. In this guide, we’ll walk you through everything you need to know about buying at auction as a first home buyer in New Zealand.

Understanding the Auction Process in New Zealand

Auctions follow a set procedure that’s important to understand before you start bidding. In a typical auction, a licensed auctioneer will conduct the sale of the property in front of an audience. Interested buyers bid against each other, and once bidding reaches the seller’s reserve price (the minimum the seller is willing to accept), the highest bid secures the property.

Unlike private treaty sales, an auction sale is unconditional. If your bid is successful, you are required to sign the sale and purchase agreement immediately and pay the deposit, which is usually 10% of the purchase price. There’s no opportunity to add conditions such as a building report, LIM, or finance clause—you must have all your due diligence completed beforehand.

Why Auctions Appeal to Sellers

Auctions are a popular method of sale in New Zealand because they often create competition among buyers and can lead to a higher selling price. Sellers are also attracted to the certainty of an unconditional sale—once the hammer falls, the deal is done. For first home buyers, this means being prepared to act decisively, as there’s no room for negotiation or changes once your bid is accepted.

The Importance of Mortgage Pre-Approval Before Auction

One of the most critical steps for first home buyers considering buying at auction is obtaining a mortgage pre-approval. Without a pre-approval, you risk bidding on a property that you may not be able to finance, which can lead to serious financial and legal consequences.

IMPORTANT: A winning bid at auction is an unconditional sale. Therefore, you need to make sure you have obtained explicit unconditional finance approval to bid at an auction from your mortgage adviser or bank.

Pre-approval gives you a clear understanding of how much you can borrow and shows sellers and agents that you are a serious buyer. It’s important to note, however, that pre-approval is typically subject to conditions — such as a satisfactory property valuation, or no significant issues in the LIM or building report. Because auction sales are unconditional, you’ll need to ensure your lender is fully comfortable with the property before auction day.

If you’re unsure about the mortgage pre-approval process, visit The First Home Buyers Club’s Home Loan Approval Planning page for expert advice and tips on getting started.

Completing Your Due Diligence

Before bidding at auction, it’s essential to have all your checks completed.

This includes:

• obtaining a building report to identify any potential issues with the property.

• ordering a LIM report to understand council-related matters.

• obtaining a registered valuation (if it is a requirement of your finance approval).

• and reviewing the title to check for any restrictions or encumbrances.

You should also consider the auction terms and conditions, which are often provided in the auction pack by the selling agent. These will outline details such as the deposit required, settlement date, and any specific conditions relating to the property. It’s advisable to seek legal advice to review these documents before auction day.

For first home buyers, it can feel overwhelming to manage all these steps. That’s why The First Home Buyers Club works with trusted professionals across New Zealand to help guide you through the due diligence process. Be sure to check out our First Home Buyers Club Member Offers for exclusive deals on building reports and legal services.

First Home Buyer’s Member Offer

Schnauer & Co Lawyers provide first home buyers with tailored legal services, including help with contracts, legal advice, and purchasing guidance. Their expertise simplifies the legal aspects of home buying, empowering members to make informed decisions. Members benefit from their commitment to protecting interests throughout the home ownership journey.

Setting Your Limit — and Sticking to It

It’s easy to get caught up in the excitement of an auction, but as a first home buyer, it’s crucial to set a firm bidding limit before the auction begins. Remember, once the auctioneer’s hammer falls, you are legally bound to buy the property at the final bid, regardless of whether you later regret your decision.

Your limit should be based on your mortgage pre-approval, your savings, and your overall budget, including any extra costs such as legal fees, moving expenses, and necessary repairs. Never exceed your limit in the heat of the moment— walking away is always better than overcommitting financially.

The Day of the Auction: What to Expect

On auction day, arrive early to familiarise yourself with the setting. The auctioneer will often read out the terms and conditions before bidding starts—listen carefully to these. Bidding can begin slowly but may escalate quickly, so stay calm and focused.

If you win, be prepared to sign the sale and purchase agreement immediately and pay the deposit. Make sure your solicitor is available to assist with any final questions, and have your funds ready to transfer the deposit.

If you’re unsuccessful, don’t be discouraged. Auctions are competitive, and it may take several attempts before you secure a property. Keep learning from each experience and stay positive—your first home is out there.

Alternatives if You’re Not Comfortable with Auctions

While auctions are a common method of sale in New Zealand, they aren’t the only option. We often advise first home buyers to avoid them as they can be highly competitive and difficult to get a positive outcome. This can result in thousands of dollars spent without getting a positive result.

If the auction process feels too risky or stressful, you may prefer to focus on price by negotiation listings with or new build properties. These options often allow for conditions such as finance and building inspections, providing more flexibility for first home buyers.

You can learn more about different ways to buy a home take a look at our Finding A Home page.

Why It Pays to Be Prepared

Buying at auction as a first home buyer is not for the faint-hearted, but with the right preparation, it can be a fantastic way to secure a home. Having a solid understanding of the auction process, getting pre-approval in place, completing your due diligence, and setting a firm bidding limit are key steps to success.

At The First Home Buyers Club, we’re here to support you every step of the way—from understanding your borrowing options to helping you navigate the complexities of buying at auction. Our goal is to make sure you feel confident and informed throughout your first home buying journey.

Disclaimer: This article is provided for general information purposes only and does not constitute personalised financial or legal advice. Every home buying situation is different, and requirements may vary depending on your circumstances. We strongly recommend that you seek independent advice from a licensed financial adviser and a qualified lawyer before making any property or lending decisions.