Sold at Auction — or Was It? Understanding Underquoting, Dummy Bids and Your Rights at a Melbourne Auction

Buying at auction in Melbourne is governed by strict Victorian laws designed to protect buyers and promote transparency. Real estate agents must provide a Statement of Information (SOI) with a genuine estimated selling price and three comparable recent sales, dummy bidding is illegal, and if a property passes in (fails to reach the vendor's reserve price), it has not been sold. Instead, negotiations usually continue privately, often at a price that differs from the advertised range. Understanding how these rules work can help buyers avoid common misconceptions and negotiate with greater confidence.

What Underquoting Actually Is

Underquoting occurs when a property is advertised at a price that is lower than the agent's reasonable estimate of its likely selling price or the seller's genuine expectations, attracting buyers who are unlikely to be able to purchase the property.

Under Victorian law, every residential property offered for sale by an estate agent must be accompanied by a Statement of Information, which includes:

an indicative selling price or price range (with a range no greater than 10%)

three comparable property sales from the previous six months (where available)

the median house or unit price for the suburb.

Agents cannot advertise using misleading phrases such as "offers above" or "from," and the advertised indicative price must not be lower than:

the agent's estimated selling price,

the seller's asking price (if one exists), or

a written offer that has already been rejected because it was too low.

These requirements are enforced by Consumer Affairs Victoria under the Estate Agents Act 1980 (Vic) and the Sale of Land Act 1962 (Vic). When selecting comparable sales, agents are expected to consider all relevant market evidence available to them—not simply choose the lowest-priced examples.

Some industry groups have proposed reforms that would require reserve prices to be publicly disclosed several days before auction. At the time of writing, this is not Victorian law, so buyers should continue to assume the reserve price remains confidential until the auctioneer declares the property "on the market."

How a Melbourne Auction Actually Works

Auction day follows a relatively structured process.

Interested buyers register to bid before the auction begins. Bidding then proceeds openly until one of two outcomes occurs:

The Reserve Price Is Reached

Once bidding meets or exceeds the confidential reserve price set by the seller, the auctioneer will normally announce that the property is "on the market."

From that point onward:

the highest bid will purchase the property,

there is no cooling-off period,

contracts become unconditional once the hammer falls.

The Property Passes In

If bidding stops below the reserve price, the auctioneer may pause to consult with the seller before declaring the property passed in.

Contrary to what many buyers assume, a passed-in property has not been sold.

Instead, negotiations continue privately after the auction.

Dummy Bids vs Vendor Bids

These two terms are often confused.

Dummy Bidding

Dummy bidding occurs when someone places fake bids purely to inflate the sale price.

This practice is illegal in Victoria.

Vendor Bids

Vendor bids are different.

The auctioneer may place a bid on behalf of the seller provided it is clearly announced as a vendor bid. Vendor bids can only be used in accordance with Victorian auction rules and are generally made before the reserve price has been reached.

Knowing the difference helps buyers avoid assuming every unusual bid is unlawful.

Passed In at Auction: What Happens Next?

If a property passes in, the highest genuine bidder is generally given the first opportunity to negotiate directly with the selling agent.

This can become a standard private treaty negotiation, where:

there is no public bidding,

the reserve remains confidential,

negotiations may continue for hours or even days.

Many buyers later see the property reported as "sold after auction" without ever knowing how the final price was reached. This is one reason auction results can sometimes appear confusing.

Because negotiations now happen privately, buyers who have already researched comparable sales and market conditions are in a much stronger position than those relying solely on the advertised price guide.

How to Protect Yourself Before Auction Day

Preparation remains the best defence against underquoting or emotional overbidding.

Before attending an auction, consider:

reading the Statement of Information carefully;

comparing the listed comparable sales with recent independent sales in the same neighbourhood;

reviewing recent auction clearance rates and buyer demand;

inspecting how long the property has been on the market; and

setting a maximum purchase price before bidding begins.

On auction day, pay close attention to any vendor bid announcements and remember that the advertised price guide does not reveal the reserve price.

If the property passes in, remaining calm and negotiating using recent comparable sales rather than emotion often produces a better outcome.

What This Means for Buyers

Melbourne's auction system is highly regulated, but understanding the rules gives buyers a significant advantage.

Knowing what underquoting looks like, recognising the difference between vendor bids and illegal dummy bids, and understanding what actually happens after a property passes in can help buyers make more informed decisions and negotiate from a position of strength.

Many buyers also choose to engage a buyer's advocate to independently assess the Statement of Information, review comparable sales, identify potential underquoting, and represent them during auction bidding or post-auction negotiations.

Forge Real Estate provides buyer's advocacy and auction representation services across Melbourne's inner-city suburbs, helping clients navigate competitive auctions with evidence-based advice and experienced negotiation support.

Forge Real Estate Melbourne can help you blueprint your future by finding the perfect blue-chip property where your lifestyle needs and investment goals converge.

📞 Phone: (03) 91003633

✉️ Email: info@forgeproperty.com.au

🌐 Website: www.forgerealestate.com.au

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