Are dutch auctions illegal or just a pain in the *ss?

C

coolie21

Just wondered, for my own education

Property came on the market 2 days ago. Wife offered on our behalf full asking price and no finance clause. Vendors mysteriosly 'on flight to singapore' and uncontactable. Meanwhile agent shoveling other parties through. Agent comes back to her last night and says he has a better offer - wait - $1000 over asking price but conditional on finance etc. I called him today expressing an interest in the property (he didn't ask who he was talking to) and he states he has an offer of $11000 over asking (conditional on finance) and 'other interested buyers'. When I questioned him about the ethics of giving out other parties verbal offers he flatly denied that he had just given me a figure....

I thought it was incredibly stupid of him to put a potential buyer and possible repeat customer so far offside with the way he is conducting himself, but maybe I am overly sensitive and this is just the way things are. I found this document online which condemns the practice but doesn't say whether it is illegal in Queensland. As an investor I am happy to just walk away from this property if the price looks like spiralling up, but it seems a funny way to do business....

In SA, as a means of protecting against “Dutch auctions”,
it has been proposed, as of 2004 that agents should be required to submit all written offers to the
vendor and to retain the offers for a reasonable period to enable these to be inspected by the
regulator in the event of complaint. Further it should be an offence for an agent to disclose details of
an offer on a property to any person interested, or potentially interested, in purchasing the property.
Click to expand...

Any views/personal experiences? Incidentally, he was refusing to take written offers 'at this stage'
 
R E agent is doing a good job of securing the maximum value on behalf of the vendors. Dutch auction can be healthy (for the vendor) in a growing market, however can put a lot of buyers off in a stagnant market.

I don’t believe it is illegal and wouldn’t think it will be unethical, however as a buyer I would find it frustrating.

Harris
 
Yes, from a buyer's pount of view they are unattractive because your negotiating power is basically non-existent.

perfectly legal.
 
My understanding here is that if the agent gets a good offer, eg. like you submitted, he may then call other interested parties and say to them that there is a strong offer to be submitted to the vendor and do you have any further interest in the property and if so what is your best offer...but, I don't believe the agent is allowed to disclose the actual price of your offer to the other parties.

If he did, and I found out about that, I'd be inclined to tell him to p**s off and walk away from the deal. If the agent/vendor are going to play people's offers against each other, they should have an auction! - that's what they are for!!

At least here you can physically see the other 'interested parties' and know that they do in fact exist and are not a figment of the agent/vendors imagination!!!

If you get involved in this sort of 'dutch auction', how do you know whether the other 'interested parties' actually exist, and the agent is not just making it up???

I would be inclined to think that this sort of behaviour is againt the REI code of conduct? - but maybe someone here will be able to clarify further...

GSJ
 
coolie21 said:
IAny views/personal experiences? Incidentally, he was refusing to take written offers 'at this stage'
Click to expand...
Yes just walk away,he is just playing everybody off each other until some
cash up individuals walk in the door and pays some overvalued price and
thinks after the the R/A has told them 20 times that this is the deal of
your lifetime....willair
 
We've been involved in Dutch auctions before. One way around them is to put in your offer "valid until" 5pm that business day (or 5pm next business day). If you do this when the property first comes on the market, it really restricts the agents in being able to get other prospective buyers through the property in time to make other offers.

Cheers,
Jen
 
I have just sold a block of 4 flats and my agent refused to get involved in a Dutch auction, I am sure we could have got more but as far as he was concerned it was not in the best way to sell.

As it happened we had 4 buyers all signed contracts with one a cash unconditional offering more than the asking price. The agent sent me all contracts and I had to choose.

Naturally I chose the cash unconditional. Property sold in 3 days!!!

I admire the agent for sticking to his guns and being totally upfront with the potential purchasers. They were all on a level playing field so to speak.

Chris
 
personally, i wouldn't get involved nowadays. i note that the other two offers are conditional on finance - many years ago i got caught in a similar situation and offered higher than the "conditional offer" ... only to find out soon after that they then offered on another lesser priced property, conditional, and then their finance fell over - so i got sucked into paying more than i should've (by about $15k) because their finance would've fallen over on the one i bought.

i recently (6 months ago) made an offer on a great little duplex, in a top location in newcastle, returning nearly 8% - but when it got to a 3 way tussle, i bowed out. didn't want to get into a dutch auction (and found a better purchase later).
 
lizzie said:
didn't want to get into a dutch auction (and found a better purchase later).
Click to expand...
Hopefully this is always the way for the investor - there is always another deal!

Looks like the consensus is that it is a pain in the *ss, but not illegal, despite the comments made in the quote I posted on disclosing actual offer amounts.
 
The agent is clearly just "trying to be fair to all the other buyers" .

If you let it go dont be surprised if the agent comes back with "the other buyers finance fell through"

Poker face time :cool:
 
I'm sure it must be 'illegal' or against Real Estate Institutes' policies...it certainly seems 'unethical'. I rang the REIV in Melbourne to enquire about this and they said they no longer take consumer enquiries! - how hopeless is that?! This mob most certainly only cares about its members!

GSJ
 
Perhaps I'm confused but my understanding of a Dutch Auction is that the auctioner starts with a high bid and lowers the bid until a bid is accepted by a buyer.
 
willair said:
Yes just walk away,he is just playing everybody off each other until some
cash up individuals walk in the door and pays some overvalued price and
thinks after the the R/A has told them 20 times that this is the deal of
your lifetime....willair
Click to expand...
Sounds like a good idea to play everyone off against each other .
caveat Emptor..........let the buyer be ware
I do it all the time between Myers , Harvey Norman and a local electrical store, though walking the 30 m back and forth at the local shopping centre is a little annoying
 
Last edited:
No a Dutch Auction is where no one knows what the price that has been offered is. For example Property is shown as $350k:

1) first person offers $325k unconditional,
2) second person comes along not knowing what first person has offered but KNOWS someone has put in an offer so offers $330k but subject to finance,
3) 3rd person comes along Agent states there are two offers on table so offers asking price with conditions,
4) 4th person offers asking price unconditional

Agent puts all offers to vendor to choose.

Its where no one knows what anyone has offered and Agent does not disclose whether your offer is higher or lower than offers on table.

Does that explain it?

Chris
 
Ah, I think what coolie21 is describing then is a poorly run dutch auction! ie. where the agent discloses all offers to other parties and neither party knows who the other party is, because they are trusting that when the agent says there is another 'interested party' - they do in fact exist!

GSJ
 
chrispy said:
No a Dutch Auction is where no one knows what the price that has been offered is. For example Property is shown as $350k:

1) first person offers $325k unconditional,
2) second person comes along not knowing what first person has offered but KNOWS someone has put in an offer so offers $330k but subject to finance,
3) 3rd person comes along Agent states there are two offers on table so offers asking price with conditions,
4) 4th person offers asking price unconditional

Agent puts all offers to vendor to choose.

Its where no one knows what anyone has offered and Agent does not disclose whether your offer is higher or lower than offers on table.

Does that explain it?

Chris
Click to expand...

Hi Chris

That doesn't explain it, acouple of links that may assist.

http://www.flowerauction.com.au/index.php?page=dutch&sub=y

http://en.wikipedia.org/wiki/Dutch_auction
 
I have just been through it with an Agent who told me he would not get involved in a Dutch Auction and went through the description as I detailed it.

I am explaining what happens in fact not in theory :D

Chris
 
chrispy said:
I have just been through it with an Agent who told me he would not get involved in a Dutch Auction and went through the description as I detailed it.

I am explaining what happens in fact not in theory :D

Chris
Click to expand...

Hello Chrispy

In the last 30 years of dealing with agents I have generally heard this called a blind auction, however times change and being an old fart I should catch up with the new meaning of words.

However I recently had much the same experience, 3 parties interested in a property, the agent approached each party asked for best offer, no 2nd chance and that there would definately be no blind auction. Next day agent told me 1 party had pulled out and I had the 2nd highest offer and would I like to make another offer.

I pointed out this was now a blind auction I considered this to be unethical and was walking away, she agreed and told me the principal RE told her to do this.

4 weeks later another property through the same REA came up for auction, 2 days prior to auction I made a lowball offer and the elderly owner decided
she preferred a private sale,again 2 other parties were involved and the agent
said this would be a blind auction.

Luckily 1 party could not be contacted and the 2nd party did not want to take part in a blind auction, i made a 2nd offer, and said I was happy to walk if it was not accepted. It was accepted and I think that I walked from the
1st deal helped.

The property is a 2 bed. unit in Brighton East Paid $390000,
Renow'ed for $ 22000
Valued at $470000
Rented for $360 p.w.
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=5455918

A lovely fact.
 
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