I went to 2 auctions last month to find out how much people pay for a house in my suburb. The two auctions were VERY different.
House 1: The agent was hoping the house to sell for more than $300,000. On the day, there were at least 80 to 90 people gathered in front of the property. The house was very close to the train station and was very well kept, at least the vendors made very good effort in the presentation of the property both inside and outside. 3 bedrooms, decorative french windows (not real ones), relatively high ceiling, reasonable size of land at the back, and nice front rose garden. Asking $280000+ (I think, can't remember exactly). The first person who put his bid down called out $300,000. At that moment, I sort of knew that the house would sell for quite a lot of money. I think there were 4 or 5 parties bidding at the beginning and the pace can be described as almost allegro, after the price shot above $350K or $360K, only 3 parties were left to continue. They fought for it until around the $400K mark, and then only 2 parties carried on, and the house was sold at $421,000! I thought the bidding was all too hot and the final price was well above what anyone had expected. The bloke who started the bid stopped at the last minute, thus letting the other party win the auction, but judging from his manners, I didn't feel good about this auction. It almost seemed to me that he was trying to push the price as high as possible, staging a show and then back down the last minute leaving the other bidder to pay for the property at an incredibly high price.House 2: No more than 30 people were present at the auction. It is 5 minutes drive from house 1, not too far from the next train station. The agent had a hard time getting the auction to start. No one put down a bid until quite a few minutes had passed. The house needed quite a bit of work, but the structure was good, the block of land at the back was very large, 3 bedrooms, car port with lots of potential for development. I thought it was a much better buy, at an asking price $200000+. Slow bids took the property to $215,000 and it was sold too. What I had in my mind was that this house has lots of potential, a home owner or an investor can spend $30000 to $50000 and turn it into a palace, at least as good as house 1, if not even better. There was so much room to add value to it. I think the price was more "normal" with this house than with house 1.
I later found out that the reserve price for house 1 was $350000.
What a dutch auction!With a family member having been an extremely well regarded estate agent, I would very much doubt that any vendor would have someone push a price up to the last minute. It is too big a risk that the other party will pull out and they are left with no sale. Having said that, my relative (who didn't much like promoting auctions – preferred private treaty) watched as her vendors (who really wanted to auction their house) had a dummy bidder make a high first bid, and no-one else bid after them. It was a dismal failure and served them right. There were genuine buyers in the crowd, but the first aggressively high bid blew them away. They would have paid more, but the psychology of an auction is rather intimidating.
She often said that offers prior to auction can be the best price a vendor will get because people offering prior to auction go in with a figure they think will be attractive enough to the vendor to cancel the auction. We had a case in a street near us several years ago where the offer prior to auction was $375K which was refused. Auction day saw the highest bid $310K or thereabouts. They were gutted as the first offer people had bought elsewhere. Sometimes it pays not to be too greedy.
I don't say in the first auction you saw there was not some vendor bidding, but I would think the vendor would not take such a huge risk s to take it to the wire with a dummy bidder.
Wylie
Auctions are indeed funny places….
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