6 Comments

  1. Richard Kellaway
    July 24, 2019 @ 4:24 pm

    I remember sitting in a very controversial seminar of yours in Melbourne back in the early 90s – in a packed room full of melbournes “best” agents as you spruiked your anti-auction sermon to a crowd that was equal parts appalled and disgusted. ( I remember Greg Hocking standing up the back spitting venom at you!) but as an impressionable early 20 something – what you said about the auction not producing the best result hit me like a bolt out of the blue.. but it made perfect sense. Of course – you only get the least amount the top bidder has to pay! I’ve been a supporter in the background since that day – loved you fight against fish oil salesman and your swimming upstream against the Melbourne Auction establishment. Keep fighting for the little guy.

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  2. Greg Bell
    July 24, 2019 @ 6:21 pm

    I follow the logic and the maths, but in a free and open market (ie. information is available), it has to work that way, right? The winning bidder bids just a smidge higher than the 2nd highest bidder.

    Are you suggesting a closed bid auction, or other information limiting system? If so, why would buyers agree to that?

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  3. Sandor
    July 25, 2019 @ 12:43 am

    Neil, you are absolutely right! You were even generous with your example because I’ve been to actions where the bids dwindled down to just $500 increments, so the final price paid was the second best top offer + $500.
    Also, sometimes a lot of people turn up to actions, say 50, but there may just be 2 or 3 serious bidders. The rest are family and friends coming along on both the seller’s and buyer’s side, people from the street, other sellers who just want to get a sense of the market, the agent’s affiliates, bargain hunters who only bid if there are no serious bids and people who are just curious about auctions. The large crowd makes the agent sound VERY convincing when he/she tells the seller: “Look, there are obviously a lot of interested parties but they don’t bid because the market dictates a lower price at the moment. You must reduce your reserve…” I’ve also seen several staff members from the agent ganging up and taking turns working the poor, hapless seller. 🙁
    I’ve turned agents down altogether in the past because they were pushing the action option. I’m sure that they would’ve reluctantly agreed to drop the auction just to get the contract to sell but by that time they’ve lost my trust.

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  4. ron jackson
    July 25, 2019 @ 1:23 am

    I think it is only an advantage to have an auction in a rising market, because if a bidder has missed out on other sales, chances are they might go above their original maximum price so that they won’t miss out.

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  5. Paul
    July 25, 2019 @ 5:15 pm

    Neil,

    I totally agree with what you say.

    Here is my real life example:

    Right at this minute I am sitting in my (newish) home that I bought at auction in competition with initially 5 bidders (4 dropped out as they reached their limit), then 1 other bidder until the hammer close.

    But, this is what what the agent and the sellers don’t know and will never know: I was willing to pay up to $30,000.00 more than I actually paid!

    Why would I have paid more?

    Here’s why: Over the space of 12 months I’d missed out on a number of properties in a rising market and was getting really fed up with missing out (10 times) and living in a less than ideal temporary accommodation.

    Also, I’d done my research on the home and the area and calculated that my top price would still be doable financially and would still represent a decent investment medium to long term.

    At auction close, I was happy, as I think I paid a fair and reasonable price.

    The sellers were happy – they received a price well over their reserve. But they didn’t know I had an extra $30k up my sleeve!

    Auctions? Not so bad if you are a buyer, but it wouldn’t be my preferred method to sell.

    cheers

    Paul

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  6. John E
    July 31, 2019 @ 11:42 am

    The logic is unarguable – that at auction you get just a bit over the second highest bidder’s top bid.
    But if you don’t go to auction, you need a very skilled agent to work out for you what the second highest bid would be, and what the top bidder’s real top limit is. There is no guarantee that the agent will be able to do this. And agents will often be prepared to pressure you to accept a particular price even if a more skilled agent would get you more. Sure, the agent gets additional reward if he gets you the higher price, but most agents will see that it is better for them to have a quick sure sale at a slightly lower price than take the risk of no sale or lengthy delay.
    Also, people sometimes “crack” at auction and go beyond their previously “firm” top limits.
    Not an easy process whichever way you go!

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