Incoming auction laws don’t appear to be changing the status quo…

Incoming auction laws don’t appear to be changing the status quo…

The new changes to the auction system are due to come into effect on the first of January.  They have been designed by the Office of Fair Trading to stop underquoting.  But will they really work?  Well we are less than four weeks away and yet it appears to be ‘business as usual’.  Let me explain.

On Saturday a colleague and I bid at three auctions on behalf of clients. Despite all the recent media exposure on underquoting, efforts by the Office Of Fair Trading to educate the industry on the changes and with sales agents knowing we are only weeks away from changes coming into effect to try to prevent it, it was another auction groundhog day.   Here’s how it played out….

The first property had been marketed with a price guide of $850k+ however the reserve was $1m.  After the auctioneer refused to accept a bid below $950k it was passed in on a vendor bid of $920k.

At auction two the guide was $1.7m+, the bidding stalled at $1.775m.  The agent told us and the other buyers that the reserve was $1.860m and said to each bidder “can you offer this?”

The agent eventually convinced a buyer to offer $1.8m on the condition that the agent convince the vendor to drop the reserve to $1.8m. The agent took some time with the vendor but the property was eventually called on the market for sale at $1.8m. It sold after a couple of more bids for $1.815m.  

Auction three was marketed with a guide of $1.5m+ and three parties registered for the auction. The bidding opened at $1.5m and moved up in twenty thousand dollar bids to $1.560m, then it was silence from the buyers. The auctioneer then put in a vendor bid of $1.6m. 

The sales agent then convinced the highest bidder to offer $1.605m (an increase of $45,000 against himself). The agent then went inside to speak with the vendor.  When he returned he said to the buyer (whilst showing the written reserve letter) look we have a reserve of $1.7million so if you want to buy it then that is what you have to offer.  Again silence.

The agent went back inside the house and when he came out said to the highest bidder that the reserve would be reduced to $1.650m if you bid that price. After some discussion with what appeared to be a family member the highest bidder agreed to bid another $45,000 against himself.  The property was called on the market at $1.650m and with no further bids made the property was sold. 

The buyer (clearly inexperienced and being very reluctantly led every step of the way by the sales agent) paid $110,000 above the next highest genuine bid and $150,000 above the sales agent’s guide which was still $50,000 below the reserve. 

Unfortunately it’s just another typical week where buyers waste their time and money preparing to bid on properties they were led to believe were in their price range that never really were, with reserves set significantly above the price guide advertised. 

The new auction laws designed to stop underquoting come into effect in January.  Will they stop this farcical, misleading and deceptive practice known as underquoting?  I guess we will soon find out!  

If you would like to see underquoting stopped click here and sign my petition to stamp out underquoting and dummy bidding for good.  

Categories: Auctions