What does “passed in” mean? Investment terms explained
Prospective buyers visiting auctions or looking at the market may have heard the term “passed in” before.
The quick summary is that this means that the reserve price has not been met and therefore the property has not managed to sell at the auction.
This does not necessarily mean that the property doesn’t sell on the day – often, the highest bidder will be taken inside for further negotiations and the property may sell straight afterwards.
Century 21 notes that it can be frustrating for the vendor to have a property passed in at auction and it can be emotionally charged. They note that it is always a potential outcome and to ensure you have chosen an agent who will be able to best negotiate on your behalf if you are unsuccessful with selling during the auction.
“Many prospective buyers will even increase their offering from what was bid at auction in order to secure the property, sometimes reaching the reserve price,” they advise.
In some states, the highest bidder has that first right of negotiation.
If the property passes in on a ‘vendor bid’ this means that the vendor has used their hand and no other bid was made past theirs.
If you don’t know what a vendor bid is, you can read our explanation here.
If you’re the highest bidder and it is passed in, there are some things you can do to ensure it swings in your favour.
Firstly, understand that it doesn’t mean the property is a dud because it has passed in. The auction could have been lacklustre, and there could be any number of things causing people to keep their hands in their pockets on that day.
You can read this guide from buyer’s agent Warwick Brookes on what you’re supposed to do if you are the person with the first right to negotiation.
“Don’t be frightened to say things like, 'This is already at the upper end of what I think the property is worth' even if that is not the case. If there are no other buyers in sight and everybody has left except yourself, then minimise the amount you are willing to counter-offer,” Brookes advises.
And if you don’t have first right? It may end up on the market again. It’s also worth giving the agent a call and saying you’re still interested, or waiting around to see how the first prospective buyer responds.