CRUNCHING BARGAINS AT AUCTIONS
7th December 2006
CRUNCHING BARGAINS AT AUCTIONS
Bad for sellers, good for agents - and buyers.
I believe my experience as a buyer highlights why sellers should NOT use auction.
We went to an auction to get a feel for the market in an area. Knowing the recent sale prices of properties, we did not think this home would be within our price range.
The auctioneer made the usual statements highlighting the benefits of the property and asked for opening bids above the quoted minimum price.
I waited for something to happen but no one bid so after consulting with my wife, I made an opening bid $30,000 below our maximum price and waited to see who else would get involved.
No one else bid against us so the auctioneer placed a vendor bid $10,000 higher and I again waited until he was about to close bidding and then I placed another bid $10,000 higher (but still $10,000 below our maximum).
When no one else bid against us, the auctioneer closed the auction and invited us in for negotiations. The auctioneer told us we were $50,000 below the reserve of the property and asked us what we would be willing to pay.
Not wanting to draw out the process, I told him our maximum price of $40,000 less than the reserve and said that I thought we were wasting his time. We were perfectly willing to leave and allow the property to go to market again.
The auctioneer assured us that the negotiations were still alive and went back to the vendor with our offer. He then returned and asked us if we were willing to increase our offer at all.
My wife jokingly raised our offer by $500, still $39,500 below the reserve. The auctioneer went to consult the vendor as we prepared to leave and continue our house hunting.
We were astonished to have the auctioneer come back and congratulate us on our purchase.
I am very happy but really do believe that a buyer with a better offer could have been found, given more time. I felt guilty and embarrassed at the sellers being forced to sell so far below their expectations.
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Auction time is crunch time for the sellers. The sellers barely have time to think about what's going on. Agents can force a quick decision and be sure of getting a commission. Indeed, agents are trained to crunch sellers at auctions.
As it says in a Real Estate Institute of Australia training manual for agents, "Move quickly! Don't give them time to dwell on the price."
Of course, this sale will be reported by the Real Estate Institute as another "auction success".
But in real estate - and especially at auction and especially in a falling property market - the word "success" means success for the agents in getting a commission.
Agents are paid to act in the best interests of sellers but most agents, especially those using auctions, act in the best interests of agents.
Auctions today are bad news for sellers but good news for buyers.
Stories posted on this site are authentic.
The only changes may be brief edits and spelling or grammar corrections.
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This story was taken from the Stories page of the Jenman website.
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Articles
INSTANT REACTIONTo put a property on the market takes effort. There is the effort in selecting the agent and marketing
strategy, the effort to prepare and present the property and then the effort to keep the presentation A1 throughout the campaign.
CONDITIONINGThe tricks used to drive your price down.
THE TWO RESERVE PRICESAt an auction, the property cannot be sold until the bidding reaches the sellers reserve price. Many sellers that sign up for an auction are comforted by the fact that the reserve price will protect them against underselling.
