If you have attended a property auction in Australia, you have almost certainly heard the auctioneer announce a vendor bid. Many buyers do not fully understand what this means or how it should affect their strategy. Here is a complete, honest explanation.
What Is a Vendor Bid?
A vendor bid is a bid made on behalf of the vendor (seller) by the auctioneer. It is a legal mechanism under Australian auction law that allows the vendor to bid up to (but not exceeding) the reserve price. The auctioneer must announce clearly when a bid is a vendor bid.
When Are Vendor Bids Used?
- When bidding is slow and the auctioneer wants to increase momentum
- When genuine bidding has stalled below the reserve price
- When the vendor wants to signal they will not accept the current level of bidding
- To start the auction when no genuine bidder opens
What a Vendor Bid Tells You as a Buyer
| Situation | What It Signals | Buyer Response |
|---|---|---|
| Vendor bid opens the auction | No genuine buyers have opened — low competition | Consider bidding — you may be the only genuine buyer |
| Vendor bid after stalled bidding | Genuine bids are below reserve — vendor not selling yet | Assess whether you can meet reserve before bidding further |
| Multiple vendor bids | Vendor has a high reserve that genuine buyers haven’t reached | Consider whether the property is overpriced for market |
| No vendor bids in active bidding | Genuine competition is driving the price | Bid to your maximum and no further |
Can You Be Outbid by a Vendor Bid?
No. You cannot lose a property to a vendor bid. A vendor bid is only used below the reserve. Once genuine bidding exceeds the reserve, vendor bids are no longer permitted. If the highest bid at the fall of the hammer is a vendor bid, the property has passed in and must be negotiated post-auction.
What Happens After a Vendor Bid Passes In?
If the property passes in on a vendor bid, the auctioneer will invite the highest genuine bidder to negotiate with the vendor. This is one of the best buying opportunities in any campaign. The vendor is motivated to sell, the competition is gone, and you negotiate one-on-one. Having a clear strategy for this moment is critical.
Frequently Asked Questions
Is a vendor bid the same as a dummy bid?
No. A vendor bid is legal and must be disclosed by the auctioneer. A dummy bid — where an agent or associate bids as if they were a genuine buyer without disclosing they represent the vendor — is illegal in all Australian states.
How do I know if a bid is a vendor bid?
The auctioneer is legally required to announce vendor bids clearly. Phrases like “I have a bid on behalf of the vendor” or “vendor bid” must be stated openly at the time the bid is made.
Should I stop bidding when a vendor bid is announced?
Not necessarily. A vendor bid tells you the property has not yet reached reserve. It does not mean the property is overpriced — it means the current level of genuine bidding is below what the vendor will accept. Your decision to continue bidding should be based on your independent comparable sales analysis, not the presence of a vendor bid alone.
How Collings Property Advisory Can Help
Auction strategy is one of the most valuable things a property advisor can provide. Collings Property Advisory prepares you with comparable sales analysis, a clear bid limit, a pre-auction strategy and a post-pass-in negotiation plan — all for a fixed $4,500 + GST.
Enquire now at collings.com.au/portal
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