Auction scenario - interested in your thoughts

H

Hypnotic Cat

I'm interested in people's opinions on the following scenario:

This afternoon for interest sake, I went to the auction of a 2BR duplex a few doors up the street from where I purchased my PPOR at auction 6 months ago. It's in an inner city area SA and I love the location.

The place up for auction was tastefully renovated, but the downside was it was positioned between 2 rather dingy blocks of units. About 4 units units on each side of the property with the back doors of the units facing her outdoor living area along one side of the house.

Anyway, the auction got under way, but there were only 2 registered bidders.

No one made any bids, so the agent put in a vendor bid. at $450k. Not long after, a young woman made a bid at $455k. (That in itself seemed to be a mistake as the auctioneer never announced 'it was on the market'.)

The agent then went in to chat to the owners. On coming back out he spoke privately with the bidder, her mother and several of her excited female friends. Agent went back in the house to talk to the owners. He came out once again and called for final bids. This time, much to my surprise the same buyer put in a second bid at $475k and secured the property.

Am I right to think she was crazy to bid at all in this situation? Let alone increase her offer by $20k?

I am interested in people's thoughts about such a scenario?

Seems to me she overpaid by 20 odd grand.

Would she have been better off not to bid at all and negotiate privately after the auction? As clearly there were no other bids on the day?

It seemed like she was bidding against herself. In my opinion she paid too much for a place that, while nicely renovated and in a good inner city location is poorly positioned between 2 blocks of units.

Thoughts?
 
Hypnotic Cat said:
The agent then went in to chat to the owners. On coming back out he spoke privately with the bidder, her mother and several of her excited female friends. Agent went back in the house to talk to the owners. He came out once again and called for final bids. This time, much to my surprise the same buyer put in a second bid at $475k and secured the property.

Am I right to think she was crazy to bid at all in this situation? Let alone increase her offer by $20k?

I am interested in people's thoughts about such a scenario?

Seems to me she overpaid by 20 odd grand.

Would she have been better off not to bid at all and negotiate privately after the auction? As clearly there were no other bids on the day?

It seemed like she was bidding against herself. In my opinion she paid too much for a place that, while nicely renovated and in a good inner city location is poorly positioned between 2 blocks of units.

Thoughts?
Click to expand...

The owner may have been determined not to sell for less than $475K. Do you think that was good value? She may have been happy to get the place and rather than the uncertainty of having it passed in and possibly having to compete with others who could not buy at auction, was happy to pay the price the vendor wanted.

Of course, she also may have got over excited and paid more than she needed to, but who will ever know?

Whether or not she paid too much comes down to what the place is worth.
 
Was it an infill development site with holding income? There may have been some method to the madness (it only works out at $120k/site if she can replicate the neighbouring properties) ;)
 
wylie said:
Whether or not she paid too much comes down to what the place is worth.
Click to expand...

And what it's worth to her. No one knows her motivation or means. Most property is not purchased as an investment - so it's not all about numbers.

I went to a school fete on Friday night. They had a student art auction of types - clip board next to the artwork where you wrote your details and bid. Most were going for around $20-50. I saw a piece I really liked and bid $10 more than the previous bid - $80. I went back as I was leaving and the current bid was $105. I bid $220. Was it worth $220 - no. Was it a http://www.pricasso.com/ - no. But it was worth that much to me as I wanted it, was tired and wanted to leave, wanted to make a kind of donation to the school. I had the means and the motivation. Hopefully I'll get a call on Monday.

It seemed like she was bidding against herself. In my opinion she paid too much for a place that, while nicely renovated and in a good inner city location is poorly positioned between 2 blocks of units.
Click to expand...

Who knows, she may have got a bargain?
 
wylie said:
The owner may have been determined not to sell for less than $475K. Do you think that was good value? She may have been happy to get the place and rather than the uncertainty of having it passed in and possibly having to compete with others who could not buy at auction, was happy to pay the price the vendor wanted.

Whether or not she paid too much comes down to what the place is worth.
Click to expand...

Thanks for your perspective.

I thought $475k was fair price, IF it didn't have the block of units next door. For me that fact alone would knock a big chunk off the value. For a PPOR I wouldn't even consider it, but my experience is coloured by once living next door to noisy and unreasonable neighbours and would prefer to minimise the risk of that happening again.
 
Why would you not bid at all?

If you bid and it passes in to you you get first right to treat with the vendor. I think you're crazy if you don't bid at all and risk participating in an auction after the auction.
 
Hypnotic Cat said:
I'm interested in people's opinions on the following scenario:

This afternoon for interest sake, I went to the auction of a 2BR duplex a few doors up the street from where I purchased my PPOR at auction 6 months ago. It's in an inner city area SA and I love the location.

The place up for auction was tastefully renovated, but the downside was it was positioned between 2 rather dingy blocks of units. About 4 units units on each side of the property with the back doors of the units facing her outdoor living area along one side of the house.

Anyway, the auction got under way, but there were only 2 registered bidders.

No one made any bids, so the agent put in a vendor bid. at $450k. Not long after, a young woman made a bid at $455k. (That in itself seemed to be a mistake as the auctioneer never announced 'it was on the market'.)

The agent then went in to chat to the owners. On coming back out he spoke privately with the bidder, her mother and several of her excited female friends. Agent went back in the house to talk to the owners. He came out once again and called for final bids. This time, much to my surprise the same buyer put in a second bid at $475k and secured the property.

Am I right to think she was crazy to bid at all in this situation? Let alone increase her offer by $20k?

I am interested in people's thoughts about such a scenario?

Seems to me she overpaid by 20 odd grand.

Would she have been better off not to bid at all and negotiate privately after the auction? As clearly there were no other bids on the day?

It seemed like she was bidding against herself. In my opinion she paid too much for a place that, while nicely renovated and in a good inner city location is poorly positioned between 2 blocks of units.

Thoughts?
Click to expand...

Saw this happen on a dump near Semaphore once... opening bid at $270k, no bids; agent walks around, invites one group inside (all the rest shook their heads not interested, just looking), auctioneer comes out and says it sold for $360k. Definitely paid overs at the time IMO
 
I've seen ppl bid against themselves a few times. Its a psychological tactic REA use at auctions and believe it or not, ppl fall for it. Auctions are a complete mind game and tactics used by REA are from beginning to end. Learning this and how to counter it before an auction can save you a lot of money.

Its like a lion against lambs in some auctions.
 
LeoT said:
I've seen ppl bid against themselves a few times. Its a psychological tactic REA use at auctions and believe it or not, ppl fall for it. Auctions are a complete mind game and tactics used by REA are from beginning to end. Learning this and how to counter it before an auction can save you a lot of money.

Its like a lion against lambs in some auctions.
Click to expand...

I know that some people may be fooled, but often people know they are bidding against themselves in an attempt to get to a level that will put it on the market. It doesn't always mean they are being fooled.
 
When I bought my PPOR I had the agent vendor bid against me and asked me for a raise, told him no.

Negotiated afterwards and got the property for about 10% less than I was willing to pay.
 
Big Will said:
When I bought my PPOR I had the agent vendor bid against me and asked me for a raise, told him no.

Negotiated afterwards and got the property for about 10% less than I was willing to pay.
Click to expand...

It all comes down to what the vendor will accept at the auction, what they will accept after the auction, how much interest there is etc.

For our own PPOR we stopped bidding at $190K but it was a PT auction and if we chose not to meet reserve at $230K by the end of the auction, it was open slather to anybody else prepared to meet reserve price. We chose to buy at $230K.

It doesn't mean it wasn't worth $230K (it was) but meant we didn't get the screaming bargain we hoped to.
 
Peterw said:
Wow Wylie, you bought a property for $235,000 .... :)

Oops realised that was some time ago. Bet its a bit better now :)
Click to expand...

First one I bought completely on my own was $46K. Wish I still had it now :D.

Very first one I think we paid $18K and thought that was fair price (which it was at the time).
 
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