Buying

I went to my first car auction last week and the first thing I had to do was register and sign a bidder's agreement. What was that all about?

Registering as a bidder means you give the auction house your personal details and are given a bidder's number.

The auction house does this to keep track of the bidders during the auction. After each sale, the auctioneer jots down the successful bidder's number, then moves on to the next item.

All the conditions of the auction must be made clear to the buyers beforehand. If the auction house doesn't do this, you are not bound by those terms.

Usually, the conditions will be set out on signs and in your copy of the bidder's agreement. By signing, you accepted that agreement, so read it first!

Common conditions contained in such agreements include that the buyer must take away the goods that day at their expense, payment must be made by cash, Eftpos or bank cheque on the day, and that a 12 percent buyer's premium (plus GST) will apply.

A "buyer's premium"? What on earth is that?

As you probably know, to make their money, the auction house charges the seller a commission on each sale. However, auction houses now often impose a charge on buyers as well. This is the buyer's premium, also called a buyer's commission.

So, with that agreement you signed, if you buy something you must pay an extra 12 percent plus GST on whatever you bid.

The agreement also said that all goods are sold on an "as is, where is" basis. Can they do that?

Yes. Goods sold at auction are not covered by the Consumer Guarantees Act. So, if you buy a stove at an auction, but when you get it home you discover the elements don't work, too bad.

Auction goods may be covered by the Sale of Goods Act, which requires goods to be of merchantable quality. However, auction houses can opt out of that law (and usually do).

But it's not all bad news. Auctioneers are covered by the Fair Trading Act. That means they can't say or do anything that misrepresents or misleads you about the goods on sale or the auction process.

In 1999, Christchurch Auctions auctioned off a range of lounge suites. Although the covering of the suites was a mixture of vinyl and leather, the auction house advertised them as leather, without mentioning the vinyl.

That was misleading. The Commerce Commission prosecuted, and Christchurch Auctions had to pay costs and fines of over $7000.

Complaints about auctioneers

If you think an auctioneer has duped you, you can cancel the deal and demand your money back. If you get nowhere, you can take a claim to a Disputes Tribunal.

You can also complain to the Auctioneers Association, a voluntary association of auctioneers whose members must adhere to a code of ethics. At no charge to the complainant, the association will investigate complaints involving its members. For a small fee, it will also try to resolve matters involving non-members.

Some auctioneers belong to another, similar organisation: the Licensed Traders Association.

Before the auction started, the cars were on display. Is this the only chance you get to check them out?

No. Auction houses often hold inspection days prior to the auction day. They may also produce catalogues, containing details of the goods on offer.

If you're buying a computer at auction, say, it's especially important to get it properly checked beforehand.

If you read through a car catalogue before the big day, you will have time to get a vehicle inspected by a mechanic, and even take it for a test drive, prior to the auction.

The auction house may go further. For instance, Turners hangs details in each car's window, detailing the car's age and mileage (much like the window notices you see at caryards). For vehicles worth over $2000, Turners also gives details of a simple mechanical check on each car. You can pay extra for a more sophisticated check before the auction begins.

If you want to get your own expert check, you will probably have to bring the expert to the auction site.

But what if I don't do that? Can I make my bid conditional on an expert check after the auction?

No. An auction bid is an unconditional offer to buy. If you make the successful bid, you've entered into a legal contract to buy the goods. You're committed.

I watched the auction, and the cars were selling at some pretty good prices. I'd love to take part, but I stayed in the background. I was frightened that if I scratched my nose I'd find myself owning an '82 Holden!

Don't worry: auctioneers know a genuine bid when they see one. You have to make a clear bid, and if the auctioneer isn't sure if you're just scratching your nose, they will ask.

They may also try to make the auction fun, in an attempt to loosen the bidders' wallets. They may cajole the crowd to make bids, crack jokes, and increase bids in smaller and smaller increments, playing bidders off against each other to get as high a price as possible.

Items for sale are called "lots". Once the bids for a lot get over the "reserve price" (the minimum price the seller is prepared to accept), a sign may start flashing: "Now Selling!"

If you're interested in buying at an auction, but find it all a bit intimidating, go to a few as an observer first. Get used to the atmosphere and watch how others behave. Join in once you've got some confidence.