Buying goods at auction

How auctions work

To make a bid at an auction, you usually have to register and sign an agreement with the auction house. Make sure you read the agreement before the auction begins.

The sale goes to the highest bidder, but only if that bid has met or exceeded any reserve price. Once you have cast the highest bid, it is too late to change your mind. You have entered into a legally-binding contract to buy the goods.

Goods will be "passed in", if they don't meet a reserve price. If this happens, and your bid was close to the reserve, the auctioneer may ask if you want to make another offer to the seller.

Auctions and the law

The Auctioneers Act covers all auctions in New Zealand. It requires that auctions are only carried out by licensed auctioneers.

The Fair Trading Act and the Contractual Remedies Act both apply to auctions. These acts prohibit auctioneers from misleading bidders over the nature of the goods for sale. The Sale of Goods Act says goods must be of "merchantable quality" and the seller must have good title to them. However, auctioneers can contract out of the Act.

The Consumer Guarantees Act does not apply to auctions. This means that if you buy faulty goods at auction, you don't get the same level of protection as when you buy from a shop or a second-hand dealer. See our report on Auctions for more information.

Online auctions

There is debate about whether internet auctions are "auctions" at all. They don't fit the definition laid down in the Auctioneers Act. See our report on Auctions online for more details.

When buying online

• Check the seller's trading history.
• Check the item's retail price. Not all auction prices are a bargain.
• Factor in your likely postage/freight costs.
• Consider insuring expensive items.
• If it sounds too good to be true, it's probably either stolen or the seller is working some kind of scam.
• Check the site community message board regularly for advice and warnings.
• If you are buying a major item, check the Personal Properties Securities Register (www.ppsr.govt.nz) to find out if there's money owing on it.
• If you can, pay by credit card. You can reverse the transaction if the goods don't turn up.
• Consider using an escrow service - especially with expensive items.

When selling online

• Check the site's fees and factor them into your calculations.
• Don't panic if you don't receive any bids initially. Most come in over the final 48 hours of an auction.
• Make sure your terms of sale are clear, and give an indication as to shipping costs.
• If you're not using an escrow service, don't send the goods until you have been paid (if you're paid by cheque, wait until the cheque has cleared).