A property is passed in at auction with the highest bid of $780,000, but the reserve was $820,000. What happens next?

Q: What is the correct answer to: A property is passed in at auction with the highest bid of $780,000, but the reserve was $820,000. What happens next?

The correct answer is The agent can negotiate with interested parties on behalf of the vendor. Option C is correct because under Australian real estate law and standard agency agreements, when a property is passed in at auction, the agent retains authority to negotiate with interested parties on behalf of the vendor. The vendor is not obligated to accept any bid below the reserve price, and the agent can continue working to achieve the best possible outcome through post-auction negotiations. This is a standard practice supported by agency law principles and typical auction terms and conditions.

Q: What background knowledge is needed for this Property Marketing question?

In Australian auction law, a 'reserve price' is the minimum price a vendor will accept, typically kept confidential. When the highest bid falls short of this reserve, the property is 'passed in' - meaning no sale occurs at auction. The auctioneer will announce this outcome. Post-auction, the agent's authority continues under their agency agreement, allowing them to negotiate with any interested parties. The vendor maintains complete control and can choose to accept offers, negotiate further, re-auction, or switch to private treaty sale. No legal obligations exist regarding timeframes or preferential treatment for the highest bidder.

Q: What is a good way to remember the answer to this Property Marketing question?

Remember PASS for passed-in properties: P - Property didn't sell, A - Agent can still negotiate, S - Sale is still possible, S - Seller stays in control. Think of it like a basketball game where the ball is 'passed' to the agent for continued play rather than the game ending. When you see auction questions about passed-in properties, think PASS - the agent's role continues and they can keep negotiating. If options mention automatic obligations or time limits, they're likely wrong.

Q: What exam tip applies to this Property Marketing question?

For passed-in auction questions, remember the agent's authority continues. Eliminate options with automatic obligations, time limits, or requirements to re-auction. The correct answer usually involves ongoing negotiation flexibility.

Q: How does this Property Marketing concept apply in Australian real estate practice?

A family home in Melbourne is passed in at auction with a highest bid of $950,000 against a $1,000,000 reserve. The agent immediately approaches the underbidder who bid $940,000 and the highest bidder, explaining the vendor is open to negotiations. Over the following days, the agent facilitates discussions, ultimately securing a sale at $980,000 to a new buyer who attended the auction but didn't bid. This demonstrates how passed-in properties can still achieve successful sales through agent negotiation.

Question

Property MarketingAuction_processMEDIUM

A property is passed in at auction with the highest bid of $780,000, but the reserve was $820,000. What happens next?

Answer Options

A

The property must be re-auctioned within 28 days

B

The highest bidder automatically gets first right of refusal

C

The agent can negotiate with interested parties on behalf of the vendor

D

The vendor must accept the highest bid within 48 hours