What is a vendor bid?

The three conditions

A vendor bid is permitted at a New Zealand residential auction only where all three of these are true:

• The property has a reserve price.
• The reserve has not yet been reached.
• The bid is clearly identified by the auctioneer as a vendor bid.

The bid must be clearly identified as a vendor bid. A bidder in the room is entitled to know that the bid did not come from another buyer, so plain wording matters more than auction shorthand.

What it is for, and what it is not

A vendor bid opens the bidding where nobody wants to go first, or moves it along when it has stalled well below the reserve. It cannot be used to push a buyer past your reserve, because it cannot be made once the reserve is reached.

Bidding that pretends to come from a real buyer is a different thing and it is illegal. Dummy or shill bidding, where someone bids with no intention of buying and it is not declared, is not permitted. The Real Estate Authority points to section 14A of the Fair Trading Act 1986.

What it means for you as the seller

You do not make vendor bids yourself and you do not call them from the crowd. The auctioneer makes them on your instruction, inside the limits above.

How they will be used is part of the conversation before auction day, at the same time as you set the reserve. Worth asking your agent and the auctioneer:

• How the bidding will be opened if nobody starts.
• Whether vendor bids are likely, and roughly where they would sit.
• What the auctioneer will say, so you recognise it when you hear it.
• What happens if the bidding stalls and the reserve is still some way off.

None of that should be a surprise on the day. An auction is a public process run to a plan, and the plan is agreed with you beforehand.