Article originally published on APRIL 23, 2003 - Reviewed and approved.
By Neil Jenman
Those TV auction shows are meant to entertain, not explain. The ratings prove that they certainly succeed at entertainment, but when it comes to explanation there’s another story, one they rarely show.
A recent episode of ‘Hot Auctions’ showed a home that sold in Moonee Ponds for $490,000. It was a classic example of how the full explanation is not revealed to the viewers.
Here’s what happened:
First, the entertainment. A nice home that’s been in the same nice family for years. Following the death of their mother, the children – in this case, four lovely daughters – decide to sell. We can all relate to this.
And then come the potential buyers. There’s Michael the engineer with Claire the lecturer; Julie, the share-trader and then Richard, the family man; all real people in situations just like the rest of us, all wanting to find the right home.
Okay, the bidding starts, and this is where viewers get some real entertainment. Only one of these nice buyers is going to buy. We are glued to our sets to see which buyer will win and which ones will lose. We share the misery of the losing bidders but aren’t allowed to dwell too long on this before we switch to the happy sisters. They have got what they believe was a great price – $490,000.
Smiles and congratulations all around. Great entertainment. We all feel good.
And the winning buyer? As the host of the show said: It was a “mystery man”. And who was the mystery man? Well, the host told us. He was a person bidding on behalf of Michael and Claire who had mysteriously not bid. Now the mystery was solved.
The host closed the show with this advice: “The lesson to be learnt: rather than trust yourself, give someone else a limit and they will stick to it because they are not carrying the emotional baggage you are.”
Good advice. And good entertainment.
And now, the explanation of what viewers did not see.
The buyers did give the mystery man a limit. They gave him permission to bid up to $565,000.
The viewers never saw that bit. They saw the sellers smiling because they thought $490,000 was a good price. And they were prepared to pay $565,000.
Viewers saw the buyers smiling – and why wouldn’t they when they had just bought the home for $75,000 below what they intended to pay? As happens at thousand of auctions, the sellers have been under-sold by tens of thousands of dollars.
And viewers saw the agent grinning because he just earned another fat commission for his hidden incompetence.
Remember this when you’re selling a home: Agents get a fat commission regardless of whether your home sells for a high price or a low price. Hence the reason most agents don’t care about the price, they just care about making a sale. At any price.
There’s big money to be made in real estate auctions, for agents.
But there’s big money being lost for sellers.
Especially when they don’t know the full story.
Auction – the worst way to sell your home. Anyone who says auction is the best way to sell a home is either dishonest or stupid. Or perhaps both.
Avoid auctions when selling.
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