THE (NON)SENSE OF AUCTION RESULTS

Those confusing ‘auction clearance’ rates.

Article originally published FEBURARY 10, 2004 –Reviewed and approved.

By Neil Jenman

The auction clearance rate in Melbourne last weekend was 39%.

No, it was 60%.

Sorry, make that 21%.

Confused?

You should be. Trying to make sense of auction results is enough to make any brain ache. Especially as the true clearance rate is none of the above.

The Sunday Herald Sun began its report by stating that “little more than 60% of homes sold under the hammer” on Saturday. But three paragraphs later it reported than “only 21% of the 145 properties up for auction sold under the hammer”. That suggests only 30 homes sold.

According to the figures presented, 145 properties were set for auction and 26% of them (38 properties) sold by before auction day. So, 107 properties went to auction. Thirty of the 107 sold under the hammer – that suggests a clearance rate of 28%.

But the Sunday Age reported a clearance rate of 39% from Saturday’s auctions. How that figure was arrived at is unclear. The newspaper reported that 37 properties sold under the hammer, 69 were passed in, one was withdrawn, four sold after auction and 31 sold before the event.

That adds up to 142 properties set for auctions in Melbourne on Saturday. Subtract the 31 which sold before the big day and that leaves 111 that went to auction. Of those only 37 sold under the hammer, providing a clearance of 33%.

Given the inconsistency in all these figures, the only thing readers can be sure about is that auctions performed abysmally last weekend.

There’s something about auctions that inspires dodgy data. Perhaps it’s because it’s a dodgy concept, providing opportunities for dishonesty on a grand scale. Perhaps it’s because it involves agents who have a vested interest in promoting auctions as a success story.

But you can forgive the newspapers. They rely on agents to supply the auction results and that’s always a dicey prospect.

Just before Christmas, the Sunday Age carried a story headed “Auction picture clouded by errors”. Journalists uncovered “widespread misreporting by real estate agents” which “over-stated the strength of the Melbourne property market”.

The Sunday Age found several cases where private treaty sales had been reported as auction sales and, also, a failure by agents to report properties which had been passed in, thereby boosting the success figures. In one case, 22 of 27 auctions were not auction sales at all. Agents blamed “an administrative error made by a junior staff member”, a common defence by agents caught lying.

Not surprisingly Real Estate Institute of Victoria chief executive Enzo Raimondo defended the dodgy data. The Sunday Age reported him as saying that “some reporting errors were unavoidable”.

Let’s be clear about something – when it comes to auctions, telling lies is part of the system.

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