How auction results deceive the public.
Article originally published NOVEMBER 30, 2003 –Reviewed and approved.
By Neil Jenman
It’s one of the oldest tricks in real estate – distort the sales results to make auctions look good.
Each week, agents report the results of their auctions. In the past few years, the public, the media and even some economists (who should know better) have come to rely on ‘auction clearance rates’ to judge the health of the property market.
Unfortunately, this form of property barometer is based on false information. Reporting of auction results is done by – you guessed it – the agents. When properties fail to sell at auction, many agents don’t report these flops. Even worse, when properties are sold before or after an auction, these private sales are reported as auction sales.
The only properties that should be counted as sold by auction as those that sell at auction. It’s fairly simple. But it doesn’t happen. The reporting of auction results is voluntary. Each week – especially now – hundreds of failed sales are not reported.
Alan Kohler, in an article in The Age and The Sydney Morning Herald (November 29), wrote, “Do not take any notice of auction clearance statistics. The real clearance rate is probably half what is being published.” He’s right. But sadly, few commentators are as savvy as Kohler. Most just accept the false figures as gospel.
Take Saturday November 29 as an example. In Melbourne, the auction clearance rate was reported as 56 per cent. This figure is clearly false. There were more than a thousand auctions and only 399 sold at auction. That’s 40 per cent at best (even ignoring the failed sales that were not reported).
But the figures were fudged upwards to 56 per cent by including sales made before auction and after auction. In other words, sales made by private treaty were counted as sales made by auction.
In Sydney, the clearance rate was 45 per cent. Cut that in half and it’s probably closer to the truth.
The real estate industry is deceiving almost the entire country with its auction results.
Don’t let them fool you.
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