Auction - Is this normally what haps?

[Futurist]

Hi All,

So I went for an auction on the weekend, and this is what happened towards the end of the bidding.

There were two bidders left in the bidding game.
There was a top bidder. The auctioneer tried to get another bid from the 2nd bidder but no go..The price had not reached reserve yet.

The auctioneer says 'Going once, going twice.. going 3 times...'
But he never drops the hammer.

Then the agents try to negotiate a price between the top bidder and the vendor.

Q1: I thought the hammer always drops for the top bidder, and when no others bids are coming?
Q2: If the hammer doesnt drop, and a price is renegotiated between the top bidder and the vendors - does that open up for the 2nd bidder to come back in after negotiations ?

This is the part I dont get. I thought that once no bids were coming in. Going 1, 2, 3.. then the auction ends.. and its a private negotiation with the top bidder isnt it? Slightly confused..

 

[Aaron_C]

If the auction doesn't reach the reserve the house does not sell. Once the auction finishes then they commence negotiations with the top bidder, and if that fails, it becomes a private sale.

 

[Futurist]

..Once the auction finishes then they commence negotiations with the top bidder..

Hi Aaron,

How can you tell if the auction has finished ?

In my case, the auction 'seemed' to have finished - no one was saying anything other than the auctioneer telling everyone to give the top bidder a moment to negotiate with the vendor. The auctioneer was still waiting for the Top bidder to finish negotiations before proceeding. Which to me seemed like the auction was still in progress?

 

[Aaron_C]

In my case, the auction 'seemed' to have finished - no one was saying anything other than the auctioneer telling everyone to give the top bidder a moment to negotiate with the vendor. The auctioneer was still waiting for the Top bidder to finish negotiations before proceeding. Which to me seemed like the auction was still in progress?

The auctioneer will always say when it is finished, it won't be ambiguous.

 

[Futurist]

So i'm guessing the auction was still going then.

That's what i'm not sure about - is it normal for the top bidder, and agents to negotiate with the vendor before the auction ends ?

Because if the auction is still going, and the top bidder negoatiates successfully with the vendor - what is stopping the auctioneer from saying - its on the market now at $xxx, and re-starting the bidding ?

I always thought the auction ends when no bids are coming.
And THEN negotiations take place.

 

[Ed Barton]

I've seen this quite a few times...

bidding stops. highest bidder goes inside and emerges a few minutes later and the auction is either called 123 not sold or the highest bidder makes another bid and 123 sold is called rather quickly. There has always been an opportunity for under bidders to make another bid if they're quick.

Is that what happened?

 

[Jake Milne]

Typical Auction Stages:

1. Introduction and contract particulars
2. Bidding opens
3. Half time break (agent goes inside for "instructions" but this is usually just to give people enough time to talk about bidding higher.)
4. More bidding OR no bidding
5. Property is announced on market OR auctioneer says "highest bidder will have exclusive rights to negotiate"
6. Property is either sold or passed in.

If the property is SOLD then the 3,2,1 countdown occurs and people clap.
If the price hasn't reached the reserve then the property is passed in and most people walk away.

When a property is passed in the highest bidder has the exclusive right to negotiate a price with the vendor. Usually this means that they'll be told the reserve and will have to match that. Even more common is that the agents will say the reserve is higher than it actually is and use the line "do you really want to miss out on this property for $x? We have another person outside who is interested blah blah blah..."

The highest bidder usually has about 10-15 minutes to decide after which other parties can negotiate if they're still around.


PS - exclusive right means that under bidders do NOT get the chance to bid or make an offer once the property has been passed in until the highest bidder has declined the reserve price.

 

[Futurist]

...bidding stops. highest bidder goes inside and emerges a few minutes later and the auction is either called 123 not sold or the highest bidder makes another bid and 123 sold is called rather quickly...

That sounds about right in what happened.

Once the negotiations are completed. IF the highest bidder agrees on a price - during the final 123 calling, potentially another bidder can jump in with 1k more... which makes the concept of higest bidder gets to negotiate a price thing... kind of pointless??

 

[Futurist]

If the price hasn't reached the reserve then the property is passed in and most people walk away.

When a property is passed in the highest bidder has the exclusive right to negotiate a price with the vendor. Usually this means that they'll be told the reserve and will have to match that.

PS - exclusive right means that under bidders do NOT get the chance to bid or make an offer once the property has been passed in until the highest bidder has declined the reserve price.

The thing that happened differently is that the Auctioneer never announced the passing in of the property. He stood there waiting, and keeping everyone on their toes while negotiations took place between highest bidder and vendor.

 

[7smurfs]

Even more common is that the agents will say the reserve is higher than it actually is and use the line "do you really want to miss out on this property for $x? We have another person outside who is interested blah blah blah..."

In my situation it was quite hilarious.

They got an agent to pretend to be a very interested party who happened to 'miss' the auction and knock on the door eagerly whilst I was negotiating inside.

Happy to say, I called the bluff and stood my ground on negotiating
Be careful of such tactics!

 

[Jake Milne]

In my situation it was quite hilarious.

They got an agent to pretend to be a very interested party who happened to 'miss' the auction and knock on the door eagerly whilst I was negotiating inside.

Happy to say, I called the bluff and stood my ground on negotiating
Be careful of such tactics!

Completely empathise with this situation, and well played. When property is passed in to me I make sure to negotiate outside...

I don't want to get comfy on someone else's couch; I want to see if other parties are genuinely interested.

 

[Jake Milne]

The thing that happened differently is that the Auctioneer never announced the passing in of the property. He stood there waiting, and keeping everyone on their toes while negotiations took place between highest bidder and vendor.

If he counted the property down and then the agents talked to the highest bidder that means it's been passed in...

Usually the auctioneer will say "we will be dealing with this man/woman/party/person" towards the end of the auction; before counting it down. Auctioneers usually don't say "okay folks auctions done now go home" haha

Maybe he did forget though...
Did the whole crowd just stand there?
Were people walking off?

 

[Futurist]

If he counted the property down and then the agents talked to the highest bidder that means it's been passed in...

Usually the auctioneer will say "we will be dealing with this man/woman/party/person" towards the end of the auction; before counting it down. Auctioneers usually don't say "okay folks auctions done now go home" haha

Maybe he did forget though...
Did the whole crowd just stand there?
Were people walking off?

No, he didnt forget. Everyone was still present and waiting.
The auctioneer did say something about, waiting for the negotiations to complete.

Maybe he just wanted to announce a sale or no sale.
But my being paranoid - I thought that if negotiations complete, and was successful - and when everyone was still there and present. What is stopping the auctioneer from saying "alright, the current negotiated price is $xxx, do we have any further bids..!"

 

[Jake Milne]

Was this after the half time break? Or are we talking about the half time break?

 

[buster]

If he counted the property down and then the agents talked to the highest bidder that means it's been passed in...

Usually the auctioneer will say "we will be dealing with this man/woman/party/person" towards the end of the auction; before counting it down. Auctioneers usually don't say "okay folks auctions done now go home" haha

Maybe he did forget though...
Did the whole crowd just stand there?
Were people walking off?

At all the auctions Ive been to that have been passed in , the auctioner announces a satisfactory price hasnt been reached, that the auction is over, that the highest bidder has first right to further negotiations .

 

[Propertunity]

When a property is passed in the highest bidder has the exclusive right to negotiate a price with the vendor.

Well that's what the auctioneer says - but the reality is that no such right exists in law. It is just the way gentlemen (& women), play the game - if they all abide by the rules of the game.

If the property gets passed in and the underbidder gets invited to negotiate, there is nothing stopping you from doing the same thing (if you are not the underbidder), or approaching the vendor directly (if they are in attendance). Now of course the REAs will try to prevent this - but it is important to remember that there are no rules, apart from those that exist in legislation....!

 

[jim1964]

At all the auctions Ive been to that have been passed in , the auctioner announces a satisfactory price hasnt been reached, that the auction is over, that the highest bidder has first right to further negotiations .

This is what i have always encountered as well.

 

[Futurist]

Was this after the half time break? Or are we talking about the half time break?

I dont think there was a 1/2 time break. The auctioneer never went inside.
It wall full on bidding, until no one else went higher.

Auctioneer held the auction, while highest bidder is negotiated with.

 

[Jake Milne]

Well that's what the auctioneer says - but the reality is that no such right exists in law. It is just the way gentlemen (& women), play the game - if they all abide by the rules of the game.

I'm not sure about NSW but for for Victoria, the first right of refusal is written in law and read out at every auction:

7. If a reserve price has been set for the property and the property is passed in below that reserve price, the vendor will first negotiate with the highest
bidder for the purchase of the property.

Under bidders can only negotiate AFTER the highest bidder has had the exclusive opportunity to reach the vendor's reserve.

 

[Jake Milne]

I dont think there was a 1/2 time break. The auctioneer never went inside.
It wall full on bidding, until no one else went higher.

Auctioneer held the auction, while highest bidder is negotiated with.

That's very odd then Futurist, I've never heard of the highest bidder negotiating whilst the auction is on pause... Just doesn't sound right