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When you buy at auction, there are certain
things that you need to look out for. Auction sales are different
from other sales and the legal protection that you get is also
different.
An auction sale is a contract. If you make the final bid and that
is accepted by the auctioneer then you have entered into a legal
agreement to buy the goods - even though there may be no written
agreement yet.
Any terms to the contract that the auctioneer wishes to make must
be made clear to the buyers at the time of the sale or before the
auction commences. If the auction house does not make their terms
clear or does not make them at all, the buyer cannot be held to
those terms.
Terms and conditions of auction sales
Often when you want to buy at an auction, you have to register
and sign an agreement. Make sure that you check this agreement
first.
It will contain some of the rules of the auction that you need to
know about before you buy - for example:
- buyer's premium of 10 per cent to be added to price
- goods must be collected on the day
- payment will only be accepted in cash or bank cheque
- buyer to arrange own delivery.
Laws applying to goods sold at auction
The Fair Trading Act applies to auction sales. Auctioneers must
not misled or deceive bidders as to the service they offer or the
goods for sale.
One very important thing to remember about auctions is that
auction sales are not covered by the
Consumer Guarantees Act. This means that you do not get the same
level of protection when you buy at an auction as you do when you
buy in other retail situations - for example, buying from a shop.
Instead, goods bought at auction may be subject to the Sale of
Goods Act requirement of "merchantable quality".
This means that the goods should do what they are supposed to do
and be of reasonable quality given the price.
This protection can be removed by the auction house though. The
auction must have a a clear sign at the auction, or a statement in
the catalogue, or make a verbal statement at the auction that the
Sale of Goods Act will not apply.
The sign needs only be clear enough to let a reasonable person
see and understand it, so look out for such signs.
DO:
- take the opportunity to examine the goods before you buy them
- auctioneers normally hold inspection days before the auction so
that you can check through the lots that interest you.
- make sure that you don' bid more than you can afford - once
the hammer hits the table, the goods are yours.
- check the terms of sale - can you afford the price when you
add on the buyer's premium and cost of having the goods delivered?
Selling at an auction
Reserve price
Remember that auctions are places where people go to get bargains
so you may want to put a 'reserve' price on the goods you are
wanting to sell. This means that the goods cannot be sold for less.
If goods do not "reach reserve" they are "passed in". The auctioneer
will advise you of the highest bid to see if you willing to sell at
that price.
Valuation of goods
If the goods are unique or special in some way you may want to
get an independent valuation to establish a reasonable reserve
price. An auctioneer may not want to sell your goods if they think
that your reserve price is too high. Talk to the auctioneer about
your expectations - this can save a lot of misunderstandings later.
Specialty auctions
Sellers should consider what type of auction would best suit
their goods. Ask the auctioneer what types of auctions they
specialise in. Some auctioneers offer a range of special interest
auctions such as antiques, memorabilia, stamps and coins. Others may
specialize in office or commercial products such as computers, plant
and machinery, or Police lost and stolen property auctions. All
these auctions attract different types of buyers.
Read the auctioneer's contract
Always read a contract before you sign it.
The contract should set out what commission the auctioneer will
take.
Commission is the price of the auctioneer's services and is often
a percentage of the price that the goods sell for.
eg, the auctioneer may say that the
commission is 15 percent or $100, whichever is greater. If the
goods don't sell for much, the auctioneer still makes $100.
Do not sign a contract with an auctioneer if you are unsure of
any term in the contract. Discuss it with the auctioneer, a friend
or a consumer assistance organisation.
Example
Anne was moving towns and instead of taking all her belongings
with her, she decided to sell some of her older things at an
auction. She rang the auction house and asked if they would come
over and look at the goods to see if they could sell them for her.
Someone from the auction house did come and agreed that they
would take the things and sell them for her. Anne signed the
agreement and they left with the goods.
Weeks passed and Anne hadn't heard from the auctioneer so she
rang up. All her goods had been sold. Only there was no money left
after the auctioneer's commission and the cost of collecting goods
from Anne's home had been taken off the total sale price. She was
furious. The things that she had sold were worth a few hundred at
least and she had been counting on the extra cash to help her move.
When she went to complain, the auctioneer brought out the
contract she had signed. Now, Anne could see that it quite clearly
stated that she was to pay a 15 percent commission or $100,
whichever was greater, on any sales made. Also, the contract let the
auction house charge for collecting the goods.
If you have a complaint about an auctioneer write to
Auctioneers Association of New Zealand
PO Box 40-027
Upper Hutt
Website:
www.auctioneers.org.nz
Email: auctvalue@xtra.co.nz
Freephone: 0800 289 282
Fax: 04 528 6178
The Auctioneers Association can accept complaints from the public
whether the auctioneer is a member or not. Complaints regarding
members are handled at no cost to the complainant. Complaints
against non members are normally accepted subject to the complainant
agreeing to meet the cost of toll calls and faxes.
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