Hello All
There are members who don't like our auction process as they believe that the highest price any of the bidders are actually prepared pay is not necessarily achieved.
I thought I would tell you about the auction process used in Amsterdam to see what you all think of it. I don't know if this system is used outside Amsterdam. Auctions do not take place outside a property but in an auction hall where many properties are auctioned off one after the other.
The auction is done in two phases. The first phase is the same as an Australian auction and stops when the bidding stops at which time the auctioneer bangs a little gong. That's called the price at the gong.
Then comes the second phase were the auctioneer starts with a price considerably higher (can be as much as 100K) than the price at the gong and counts down, first in large decrements (maybe 10K) and later smaller ones and then even smaller ones, if it gets that far, until someone yells mine and that's the actual buyer. If no one yells mine than the bidder at the gong is the buyer.
I don't know what they do about a reserve price.
Personally I hate auctions unless I'm not intending to bid, in which case I love auctions and find them both fascinating and entertaining. I would hate to have to buy at the Amsterdam auction. It seems good for sellers but not good for buyers.
Any opinions?
Elka
Hi Elka,
That sounds like a fair and open way for a seller to achieve best price on the day. There is a small number of auctions done in Australia similar to this (called reverse auctions) except that the Auctioneer begins at a considerable price higher than the reserve and begins to work down first person to bid before the price reaches the reserve is the buyer. This method certainly brings out the person who wants the property the most. Should see the furtive glances as the property nears the likely sale price. This would stop those nasty comments from people who say that they would have paid more but only paid as much as they had to to purchase (what a crock anyhow).
The main reason that people dislike auctions is that they don't have a value to work backwards from. (ie. a listed price)
Jon
Hello Jon
I have never seen such an auction in Australia. Sounds even more fascinating
and certainly not a process I would enjoy being involved in. Sounds too cutthroat for me. You only get one chance in both the Amsterdam auction and the reverse auction.I mean a house is not a packet of gum. It does not have a finite price but a range and I am not sure that you always get the best price with this method. If there is little interest in the property this method seems no better than the "normal" auction process. If there is a lot of interest in the property then the bidding up method gives people several chances to "stretch" the price they are willing to pay, specially people buying a home.
With the Amsterdam auction I have wondered what the person holding the price at the gong is supposed to do. Bid against themselves in the second phase?
Elka
"The main reason that people dislike auctions is that they don't have a value to work backwards from. (ie. a listed price)
Jon"
Actually Jon, if only this was the the only reason.
The main reason(s) why people don't like auctions are:-
1. Under-quoting – this is where the agent advertises the property (with or without the Vendor's permission) at a price far below both the reserve and the eventual sale price. The prospective purchasers are mislead into thinking they can afford the property, spend considerable money and time getting inspections, arranging finance, going to the "open houses" to look at the property to help them ascertain if the property is suited to them etc. There are heavy fines for this practice, although it is not well enforced.
2. Over-quoting – the agent tells the vendor the property is worth more than it really is worth to get a listing.
3. Dummy Bidding – this is where there are false bidders planted in the audience of onlookers and bidders either by the agent or the Vendor, or both, to help drive the price of the property up. They usually stop bidding when the the bidding is near or at the reserve price. This practice is now illegal in several States of Australia, with heavy fines attached, but is not well enforced.
4. No Cooling-Off period – the purchaser has no cooling off period after the auction if there is something amiss with the sale, or if they decide the property is not right for them. Again, a lot of time needs to be spent prior to the Auction with searches, building inspections etc to find out the truth behind the property.
5. Pressure and Stress – for the purchaser this is a problem, particularly if they have no experience at auctions. They often feel they will miss out on the property and then spend more than they should; especially when the property has been under-quoted and the price keeps going above their limit. For the Vendor this is a problem as they are quite often inexperienced, and are often pressured to make a decision on the day by the agent. For both parties there is stress from having to make fast decisions about a very large financial transaction in front of a crowd of people. Many purchasers now pay buyers' agents thousands of dollars to act on their behalf at auctions because they are not knowledgeable or scared to do it themselves.
6. Advertising – the Vendor needs to commit to many dollars of advertising to try to generate some interest in the property. In a private sale this is usually not necessary.
7. Auctioneer's Fee – another cost for the Vendor. Can be avoided in a private sale.
8. Time – many people cannot attend an auction or an open house when it is conducted. Sure they can bid by phone, but most people are inexperienced at auctions and this adds to their stress. They prefer to inspect and make offers as they are able to fit it in. This may not be the desired option for the agent and the Vendor, but they want/need to sell the property and should accommodate the customer (purchaser).
It is my opinion that the Vendor should have to provide at their cost, all the relevant inspections included with the necessary paperwork that Purchasers need to read before the auction (Section 32), there should also be a cooling-off period and all bidders should be registered with proof of identity at registration.
"This would stop those nasty comments from people who say that they would have paid more but only paid as much as they had to to purchase (what a crock anyhow)."
Jon, Didn't you say in a previous post on another thread about auctions that it was documented that people said they would have paid more at the auction than they did?
Actually, yeah; here it is – "Interestingly, many 'would be Purchasers' will ring after the Auction just to advise the Agent that they would have paid more for the property had it been for sale with a price -" That was on June 10, 2007.
If I was a Vendor, and I knew of this statistic, I would be reluctant to sell at auction.
Hi Marc, I am going to make the effort to answer some of your statements in your post, NOT in an attempt to try to change your mind because I know that this would be wasted breath, but just in case some other members happen to read your opinion and are swayed by it. There are, as you know, three sides to any story – Your side, My side and the truth.
I will leave it to the readers to make up their minds as to what is what. The real problem with Property selling is that on the one hand we have a Seller whose greatest fear is that they are going to be ripped off and sell their asset too cheaply on the other hand we have a Buyer whose greatest fear is that they are going to be ripped off and pay to much. Somewhere in the middle we have an Agent who has to convince both parties that they are making the right decision. Whether this is done by Auction (without a price) or by Private Treaty (For Sale with a Price) will make little difference to the unethical agent that Marc seems keen to indicate that all agents who Auction are.
Let me reply to some of his statements.
"The main reason that people dislike auctions is that they don't have a value to work backwards from. (ie. a listed price)Jon"
Actually Jon, if only this was the only reason.
The main reason(s) why people don't like auctions are:- 1. Under-quoting – this is where the agent advertises the property (with or without the Vendor's permission) at a price far below both the reserve and the eventual sale price. The prospective purchasers are mislead into thinking they can afford the property, spend considerable money and time getting inspections, arranging finance, going to the "open houses" to look at the property to help them ascertain if the property is suited to them etc. There are heavy fines for this practice, although it is not well enforced.
How many people have read an add that says ‘offers over $300,000 will be considered’ when you know damn well that the Property is worth well over $350,000. This is called baiting and is often used by poor agents to get people in the door of a Property with a listed price. Auction or not, bad agents are just bad agents.
2. Over-quoting – the agent tells the vendor the property is worth more than it really is worth to get a listing.
And this does not happen with Private Treaty listings – give me a break. I agree it should be outlawed.
3. Dummy Bidding – this is where there are false bidders planted in the audience of onlookers and bidders either by the agent or the Vendor, or both, to help drive the price of the property up. They usually stop bidding when the the bidding is near or at the reserve price. This practice is now illegal in several States of Australia, with heavy fines attached, but is not well enforced.
I can only speak for Queensland here, but the Department of Fair Trading have Inspectors regularly visiting our Auctions to make sure that this does not happen and that all bidders are registered. However, remember the Seller retains the right to bid on their own behalf and this bid is normally stated by the Auctioneer.
4. No Cooling-Off period – the purchaser has no cooling off period after the auction if there is something amiss with the sale, or if they decide the property is not right for them. Again, a lot of time needs to be spent prior to the Auction with searches, building inspections etc to find out the truth behind the property.
The statutory ‘Cooling – Off period was not instigated merely to allow Buyers to simply change their minds, it was designed to allow people who had been coerced by ‘unscrupulous Marketers’ to sign a contract to change their mind, hence the .25% withdrawal fee.
5. Pressure and Stress – for the purchaser this is a problem, particularly if they have no experience at auctions. They often feel they will miss out on the property and then spend more than they should; especially when the property has been under-quoted and the price keeps going above their limit. For the Vendor this is a problem as they are quite often inexperienced, and are often pressured to make a decision on the day by the agent. For both parties there is stress from having to make fast decisions about a very large financial transaction in front of a crowd of people. Many purchasers now pay buyers' agents thousands of dollars to act on their behalf at auctions because they are not knowledgeable or scared to do it themselves.
Let me assure all the readers here that no matter how you decide to sell or purchase your most valuable asset there will always be Stress involved. For most people that is the nature of things, and from my experience it is more often than not bought about by peoples natural lack of trust in their fellow man.
6. Advertising – the Vendor needs to commit to many dollars of advertising to try to generate some interest in the property. In a private sale this is usually not necessary.
Absolute garbage – You can not sell a secret. If people do not know it is for sale, how do they find it? Do prospective Buyers have to visit every single agent in the area that they decide to look in to make sure that they don’t miss out on anything?
7. Auctioneer's Fee – another cost for the Vendor. Can be avoided in a private sale.
A small cost in the scheme of things. And often worth it for the peace of mind.
8. Time – many people cannot attend an auction or an open house when it is conducted. Sure they can bid by phone, but most people are inexperienced at auctions and this adds to their stress. They prefer to inspect and make offers as they are able to fit it in. This may not be the desired option for the agent and the Vendor, but they want/need to sell the property and should accommodate the customer (purchaser).
Marc, you seem to be very Buyer satisfaction oriented which is admirable if you are a Buyers agent but if you are working for the Seller then you must respect their wishes and work for them. I am constantly amazed at the attitude of Buyers who say that they can’t make it at the time that you offer for an inspection and once they realize that you are not going to bend to their demands they can all of a sudden make it at the offered time. Don’t misunderstand me, I will always attempt to fit in where possible, however I am a professional and as such appointments need to be made. When was the last time that you demanded to see your Doctor, Lawyer or even any Tradesman now without an appointment?
It is my opinion that the Vendor should have to provide at their cost, all the relevant inspections included with the necessary paperwork that Purchasers need to read before the auction (Section 32), there should also be a cooling-off period and all bidders should be registered with proof of identity at registration.
On this issue Marc, I actually agree. Except I would go further and say that it should apply to any Seller under any method of sale.The only reason that this doesn’t happen in my belief, is that no Buyer would believe the reports anyway.
"This would stop those nasty comments from people who say that they would have paid more but only paid as much as they had to to purchase (what a crock anyhow)."
Jon, Didn't you say in a previous post on another thread about auctions that it was documented that people said they would have paid more at the auction than they did? Actually, yeah; here it is – "Interestingly, many 'would be Purchasers' will ring after the Auction just to advise the Agent that they would have paid more for the property had it been for sale with a price -" That was on June 10, 2007.
Oh dear Marc, do I have to explain everything to you or do you just read what you want into my words? Put simply, my statement says that after almost any Auction the salesperson will receive a phone call from a person (who was not at the Auction) who will ask ‘How much did the Property sell for?’ and upon hearing the answer will make an inane comment such as ‘Oh, is that all, I would have paid more’. The games that people play.
If I was a Vendor, and I knew of this statistic, I would be reluctant to sell at auction.
As a Vendor Marc, you have every right to make your own decisions as to how you sell your property and I wish you all the best, however your lack of trust in your fellow man possibly dictates that you should do it yourself, that way you would have no one else to blame.
Yours respectfully
JonAfter reading this article Agent Underquoting A Necessary Evil from the Melbourn Age, I fully understand why some of you are concerned with the process. This method of Auctioning has been wiped out in sunny Queensland and our system is much more controlled and open – Come on up the weather is fine.
Jon
Hi Jon,
I think we have covered it all? You are right; I do tend to favour the protection of the consumer; unfortunatly I have been burned a bit and this colours your view. Please know that I also know about the games played in Private Treaty sales as well. It is a pity that we are even needing to have this discussion about dodgy practices.
I can only hope that the other States (especially Victoria) follow your State's lead in this.
and certainly not a process I would enjoy being involved in. Sounds too cutthroat for me. You only get one chance in both the Amsterdam auction and the reverse auction.
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