What Happens When a Property Is Passed In at Auction

We hear this question regularly from Melbourne buyers who were the last bidder standing on Saturday, then found themselves in the kitchen or on the front verandah being asked to name a new price.

The short answer: A property is passed in when it does not sell at auction, usually because bidding stopped below the vendor’s reserve price. Under Rule 8 of Schedule 1 to the Sale of Land (Public Auctions) Regulations 2024, if a reserve was set and the property was passed in below it, the vendor must negotiate with the highest bidder first, but neither side is bound until a contract is signed. A purchase made within three clear business days after a publicly advertised auction has no cooling off right under section 31 of the Sale of Land Act 1962.

What does passed in at auction mean?

A property is passed in when the auction ends without a sale. Most often, bidding has stalled below the reserve price, which is the minimum amount the vendor has decided to accept.

The auctioneer may pause, speak with the vendor and return to seek another bid. If the reserve is reached and the vendor agrees to sell, the auctioneer will usually announce that the property is ‘on the market’. From that point, the highest accepted bid normally wins when the hammer falls.

When the reserve is not reached, the auctioneer may pass the property in. That does not mean the property has disappeared from the market or that the campaign has failed. It means the public bidding has ended without a binding sale, and the vendor can negotiate privately, change the asking price, continue marketing or decide not to sell for the time being.

A property may also be withdrawn from sale. The auction rules allow an auctioneer to withdraw a property at any time, so ‘withdrawn’ and ‘passed in’ should not be treated as identical. Ask the agent exactly how the auction ended.

Does the highest bidder get first right to negotiate?

Yes, where a reserve price was set and the property was passed in below it, the vendor must first negotiate with the highest bidder. This is a first place in the negotiation queue, not a right to buy at the final bid.

The rule is found in Schedule 1 of the Sale of Land (Public Auctions) Regulations 2024. The auction rules must be available for public inspection for at least 30 minutes before bidding starts.

Three limits matter:

A reserve price must have been set.
The property must have been passed in below that reserve.
The obligation is to negotiate first, not to accept the highest bid or remain in talks for a fixed period.

There is no prescribed negotiation window. The highest bidder might have 10 minutes in the dining room, or the discussion might continue by phone over the next few days. If the parties cannot agree on price and terms, the agent may speak with an underbidder or another interested buyer.

Treat the position as useful, but temporary. Until the buyer and vendor have signed the contract, there is no binding sale.

What if the property is passed in on a vendor bid?

A vendor bid is not an offer from another buyer. It is a bid made on the vendor’s behalf to move the auction towards the price the vendor wants.

Where vendor bids are permitted, only the auctioneer may make them. Before bidding begins, the auctioneer must announce that vendor bids may be used and state the words that will identify them. Each vendor bid must then be announced when it is made.

If the last announced amount was a vendor bid, ask the agent to confirm the highest genuine bid and who will be invited to negotiate first. Do not treat the vendor bid as proof that another buyer was willing to pay that figure.

In our practice, we’ve seen buyers become discouraged when a Coburg or Preston property is passed in on a vendor bid. The more useful reading is that the vendor’s expectation and the bidding in the street did not meet. That gives you information for the negotiation, especially if there were few active bidders.

Is there a cooling off period after a property is passed in?

Usually not if you sign within three clear business days after the publicly advertised auction. The cooling off periodexclusion applies even though the property was not sold under the hammer and the later discussion feels like a private sale.

For a Saturday auction, assuming there is no Victorian public holiday, a contract signed on Saturday, Sunday, Monday, Tuesday or Wednesday will generally fall within the auction exclusion. Thursday is usually the first day outside that window. Exact dates matter, so have your conveyancer check the calendar before you rely on a cooling off right.

Outside the auction window, the usual three clear business day right may apply to a qualifying residential or small rural private sale. Other exclusions still exist, including some commercial or industrial purchases, farming land over 20 hectares, repeat contracts on substantially the same terms, corporate buyers and estate agents.

Cooling off is not free. Where the statutory right applies and is used correctly, the vendor may retain the greater of $100 or 0.2 per cent of the purchase price. On an $850,000 purchase, that is $1,700.

The practical point is simple: signing on auction day and signing after the exclusion has ended can produce very different rights. Do not delay merely to gain a cooling off period without considering the risk that another buyer may secure the property. Make the timing decision with clear advice.

What can you negotiate after a property is passed in?

You can negotiate both price and contract terms because the property was not sold under the hammer. The vendor does not have to agree, but you are no longer limited to the unchanged auction contract.

Useful points to discuss include:

Purchase price: Decide your walk away figure before the agent starts moving between you and the vendor. The reserve is the vendor’s target, not a valuation or a command to meet it.
Settlement period: Ask for a date that works with your finance, lease, sale or moving plans. A 60 or 90 day settlement may suit you better than the date printed in the auction contract.
Finance protection: A subject to finance condition may be negotiable after the property is passed in. The clause needs workable details, including the lender, amount and approval date, rather than vague wording added under pressure.
Building and pest inspection: If you did not arrange reports before the auction, ask for a properly drafted condition that gives you enough time to obtain and assess them.
Deposit amount and timing: A 10 per cent deposit is common in Victoria, but it is not a fixed statutory amount for every residential sale. You can ask for five per cent, a part deposit or a later date for the balance, subject to the vendor’s agreement and clear contract wording.
Property specific protections: Ask your conveyancer whether special conditions are needed for finance, fixtures, unapproved work, vacant possession, owners corporation records, a longer due diligence period or another issue shown in the documents.

We’ve seen buyers win a small price reduction, then accept a settlement date their lender could not meet. The price gets the attention, but a finance clause, workable settlement and sensible inspection right may protect far more money.

What legal documents and costs still apply?

The vendor must give you a signed section 32 vendor statement before you sign the contract. A passed in auction does not reduce the vendor’s disclosure duties.

The contract and vendor statement should be reviewed for title restrictions, easements, planning information, notices, building permits, owners corporation material, services and outgoings. If the agent says the paperwork can be supplied after you sign, stop and get advice.

Land transfer duty, loan costs, owners corporation fees and any first home buyer concession or exemption are assessed under the usual rules. Passing in does not create a special duty discount.

The advertised price may also change after the auction. Victorian underquoting rules prevent an agent from advertising below the vendor’s reserve or asking price once known, a written offer rejected as too low, or the agent’s current estimated selling price. A revised listing can therefore appear higher than the pre auction range.

Can another buyer make an offer after the property is passed in?

Yes. The highest bidder’s right is to negotiate first, not to hold the property exclusively.

If the first discussion does not produce an agreement, the agent can approach underbidders, people who inspected but did not bid, or new buyers. A person who never raised a hand at the auction may still buy the property later.

The same cooling off timing rule applies to those buyers. A person who did not attend or bid can still lose the cooling off right by signing within three clear business days after the publicly advertised auction.

What should you do after a property is passed in?

Slow the process down enough to make a deliberate decision, while recognising that the agent may be speaking with other buyers.

Get the full contract and vendor statement reviewed. Send the exact version you are being asked to sign, including handwritten changes.
Ask whether a reserve was set. This helps confirm whether the highest bidder negotiation rule applies.
Ask whether the last bid was a vendor bid. Confirm the highest genuine bid rather than relying on the final announced figure.
Set your price and terms together. Decide what you will pay, the settlement date you need and which conditions are essential.
Put every agreed change in the contract. A reassuring conversation on the front lawn is not a substitute for written terms.
Check the cooling off dates. Use the actual auction and signing dates, including Victorian public holidays.

Ideally, involve a conveyancer before the auction, so the contract has already been reviewed and your preferred amendments are ready. If the auction has already ended, send the documents immediately and avoid signing simply to ‘hold your place’.

Frequently asked questions

What does passed in mean at auction?

A property is passed in when the auction ends without a sale, usually because bidding did not reach the vendor’s reserve price. The vendor may then negotiate privately, continue marketing or decide not to sell. If a reserve was set and the property was passed in below it, the vendor must negotiate with the highest bidder first.

Does the highest bidder have to buy a property that is passed in at auction?

No. The highest bidder receives the first opportunity to negotiate where the auction rule applies, but neither the buyer nor vendor has to agree. The sale is not binding until the contract has been signed by both parties.

Is there a cooling off period if I buy after a property is passed in at auction?

There is generally no cooling off right if the contract is signed within three clear business days after a publicly advertised auction. Outside that period, the ordinary three clear business day right may apply if no other statutory exclusion affects the purchase.

How long do I have to negotiate after a property is passed in at auction?

Victorian auction rules do not set a fixed negotiation period for the highest bidder. The agent may seek an answer that day, but you can ask for time to obtain contract, finance or building advice. The vendor can move to another buyer if no agreement is reached.

Can I ask for conditions on a property that was passed in at auction?

Yes. Because the property was not sold under the hammer, you can propose conditions dealing with finance, building and pest inspections, settlement, the deposit and property specific risks. The vendor may accept, reject or counter those terms.

Do I still need a section 32 if the property was passed in?

Yes. The vendor must give the buyer a signed section 32 vendor statement before the buyer signs the contract. The requirement applies whether the property sells at auction or through negotiations after it is passed in.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing is a Melbourne focused conveyancing practice helping first home buyers, homeowners and investors across the city. Our team reviews auction contracts and vendor statements every week, then guides buyers through the price, conditions and settlement choices that arise when a property is passed in.

Sources we consulted

Talk to us before you sign

A passed in property can give you room to negotiate, but the useful window may be short. Pearson Chambers Conveyancing can review the contract and vendor statement while negotiations are live, explain the cooling off position and help you request terms that fit your finance and settlement plans.

Email contact@pearsonchambers.com.au for a complimentary Section 32 contract review.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.