Recent press about successful bidders not signing the contract of sale highlights the need for a change to the law. This article is from the REIV archives and was published in 2008.
Every year bidding incidents at a handful of auctions highlight the need to amend the law to ensure that when a property is knocked down to the highest bidder, a binding contract exists and they cannot be gazumped by another bidder making a late bid.
That is not the case with real estate auctions presently - no binding sale exists until the successful bidder and the vendor have signed a contract.
The reason for this is historic and dates back hundreds of years to a time when most people could not read or write. To prevent frauds the English parliament enacted a law requiring all land contracts to be written and signed, if they were to be enforceable.
This law was adopted in Victoria in the nineteenth century and has been with us ever since.
Today practically everyone can read and write and the need for this law is long gone. It has been abolished for auctions in the United Kingdom and elsewhere.
When a person buys goods at an auction, the fall of the hammer creates a binding contract. The REIV believes the same should be the case for real estate transactions.
The REIV has previously written to the Attorney General, Rob Hulls, asking for the law to be changed to prevent incidents at public auctions which can be distressing for all concerned.
It is therefore pleasing that the Minister for Consumer Affairs is considering introducing regulations to prevent bids being taken after the fall of the hammer. Whilst the REIV is currently considering the actual detail the fact that action has been taken is a welcome step.
It is important the public has confidence in the outcome of land auctions, for that reason a timely change to the law to ensure the highest bidder at the fall of the hammer is in fact the successful bidder will bring certainty at the fall of the hammer.