Auctions

[Hound Dog]

Hi All,
I attended an auction on Sat 25/4 in Brisbane.While auctions in general are not my preferred means of selling or buying they can be useful for helping form a perception or sense of value for the area in which you are interested in .
In the preamble the auctioneer was stating the terms and conditions ... 10%
deposit, settlement within 30 days on an Unconditional Standard Queensland Real Estate Contract. He was also pointing out that there had been some changes to the rules of selling by auction thanks to the accc (how they affect Qld Law I'm not sure ) but if at the the end of the auction the property had not made reserve then anyone in the crowd had the right to negotiate privately not the highest bidder. He then proceeded to tell us in the interests of fairness that one prospective bidder had negotiated with the vendor to deposit only $5000 on the fall of the hammer and that he would extend that privilidge to all of us. A word in his ear from the agent saw him withdraw this generous offer from the rest of us.
My questions to the learned members of this forum are
1) How long have the rules regarding the right to negotiate been changed ? Did this become applicable when changes to the registration of bidders and the vendors bid were made to stop the dummy bidding that was rife in the industry.
2) What are the views of the forum members regarding the ethics of varying the deposit required. This obviously is not a level playing field for all. I guess the blame lies more with the vendor than the auctioneer in this instant.
Despite all of this the property was sold (well sold) on the day and reinforced my belief that the property market is still alive and well although a little slower in Brisbane.
Regards
Hound Dog

 

[Aceyducey]

Hound Dog,

I've bid under specific conditions in the past (before voter registration came in), granted not in QLD however.

There's no law I know of that forces the vendor to extend specific conditions to all bidders. This is Just as if the property is for sales by other means - there's no vendor obligation to extend the same terms to every potential buyer.

If you want to do this, basically you submit the conditions ahead of time to the REA who gets them OKed (or not) by the vendor. It's just like setting conditions in any purchase. Terms can vary quite significantly by potential buyer - particularly things like settlement timeframe, deposit amount and access to the property.

Cheers,

Aceyducey

 

[Sultan of Swing]

Hi Hound Dog

1. I'm a lisenced auctioneer and I'm not aware of the ACCC ruling that says the vendor isn't allowed to give the right the negotiate with the highest bidder. Maybe its a state law although if its the ACCC you'd think it would be federal.

2. The vendor has the right to negotiate the deposit with anyone before auction. The 10% deposit is there to protect the vendor and if he/she wants to waive it or negotiate it, its his/her right.

In my experience, its only done occasionly. Last time I did it we had a lady turn up to the auction that didn't have the cash handy nor enough in the bank. We'd just sold her home but it hadn't settled. As she wanted to bid, we approached the vendors and explained the situation to them. They agreed to $1,000. The vendors and ourselves thought it better to have her bidding than not bidding. I quickly scribbled a letter giving her permission and had the vendors sign it. As it turned out there were four bidders and she missed out.

Settlement dates can also be negotiated before auction too. If you're interested in doing that though, make sure you approach the agent a few days earlier as its best to get the solicitors to put it in writing somehow. Obviously, the vendor has to agree.

You may be thinking that, as a vendor, why would you agree to negotiating terms?

Good question. Some of you will no doubt know why but anyway...

Say you have 2 bidders that can meet the terms of the contract (30 day settlement, 10% deposit etc). The reserve is $300,000 and Bidder A can go to $320,000 but Bidder B can only go to $305,000. If these two go at it, Bidder A will buy it for $305,000 or maybe a bid over that, depending on how the bids fall.

Bidder C comes along and wants to bid and can go to around the $320,000 too but needs 90 days to settle. A vendor without any pressing needs will be more than happy to settle 2 months later and get an extra $15,000 or so.

The same would apply if Bidder C could only afford a smaller deposit. Again, its up to the vendor.

Cheers

 

[Sultan of Swing]

PS Acey can type faster than me

 

[JP1746]

Hound Dog said ...
" ... He then proceeded to tell us in the interests of fairness that one prospective bidder had negotiated with the vendor to deposit only $5000 on the fall of the hammer and that he would extend that privilidge to all of us. A word in his ear from the agent saw him withdraw this generous offer from the rest of us.
What are the views of the forum members regarding the ethics of varying the deposit required. This obviously is not a level playing field for all. I guess the blame lies more with the vendor than the auctioneer in this instant ..."

Hi Hound Dog

I'd say the auctioneer got it right the first time when he declared he would extend the privilege to all. Then he got led astray by the agent.

It's been a long time since I've read 'The Act', (Real Estate, Stock & Business Agents Act - or whatever it's called these days) but I'm fairly certain that what occurred would fall under the 'collusive practices' definition of said Act. It stipulates that an auction must be free, fair, open, etc, to all. This is common sense. (But please note, I'm not suggesting anyone deliberately attempted collusion !).

Put yourself in the bidders position;
Bidders A, B, C, and D are on one set of terms, but bidder E has been given more favourable terms, thus giving him an advantage over the others. Bidder E ends up being the successful buyer, as a result of those better terms, thus no free, fair, open competition. In such a case, bidders A, B, C, & D would certainly feel aggrieved, and rightfully so.

And no, in such a case, the blame would not lie very much with the vendor. It would rest squarely on the auctioneers head. After all, he is (or supposed to be) the expert, and the entity ensuring the auction is conducted in the appropriate manner, free of intended or accidental collusive practices.

Cheers
JamesP

 

[geoffw]

Put yourself in the bidders position;
Bidders A, B, C, and D are on one set of terms, but bidder E has been given more favourable terms, thus giving him an advantage over the others. Bidder E ends up being the successful buyer, as a result of those better terms, thus no free, fair, open competition. In such a case, bidders A, B, C, & D would certainly feel aggrieved, and rightfully so.

But then, haven't A, B, C & D been able to negotiate their own set of conditions?

I've turned up at an auction which was cancelled because the vendor sold on the day prior to auction. Some of the potential bidders were upset- but the agent suggested that anybody had had the right to also offer prior to the auction.

 

[MichaelW]

I attended an auction on Sat 25/4 in Brisbane.

Hound Dog,

If only I could do that! Travel forward in time to see how an auction is going to pan out. Would save me a lot of expense and effort looking at properties that I knew were going to go for more than I was willing to pay.

Cheers,
Michael.

 

[Sultan of Swing]

Although irrelevant, nicely picked up Michael!!

I don't think ANY agent would hold an auction on ANZAC Day.

Cheers

 

[MichaelW]

Although irrelevant, nicely picked up Michael!!

I don't think ANY agent would hold an auction on ANZAC Day.

Cheers

My wife calls me anal retentive, I like to call it attention to detail... I'm the guy that gets the High Distinction in Accounting in his MBA, some call it scary, I wear it as a badge of honour.

MW

 

[geoffw]

I don't think ANY agent would hold an auction on ANZAC Day.

No- but I missed out on a nice bargain once because the auction was held on Christmas Eve!

 

[Aceyducey]

As I said earlier in this thread.

It's legal, I've done it.

Cheers,

Aceyducey

 

[JP1746]

But then, haven't A, B, C & D been able to negotiate their own set of conditions?

I've turned up at an auction which was cancelled because the vendor sold on the day prior to auction. Some of the potential bidders were upset- but the agent suggested that anybody had had the right to also offer prior to the auction.

Hi Geoffw

A property sold before the auction is NOT an auction sale. A vendor can entertain any number and variety of offers PRIOR to auction, and if a deal suits and is consummated, it becomes a PRIVATE TREATY sale. This is perhaps what occurred in the case you cited above. Just because a vendor has listed a property for an auction, does not mean he has to go through with that auction. He can sell beforehand (private treaty sale) or withdraw it, or whatever.

However, if vendor goes ahead with the auction, all varying offers are off ! The copies of the contract given to prospective purchasers must have identical conditions - in fact, must be identical. And this is clearly confirmed by the fact that the law requires that the contract must be available at the auction for the perusal of any intending bidder - now you've never seen several contracts for the same property, each with varying conditions, floating around in an auction room, have you ? Don't you always hear the auctioneer say words to the effect ...

"ladies and gentlemen, the property is offered in accordance with the terms of the contract which I have in front of me, and which has been available for your perusal. If you intend to bid I assume you've perused it to your satisfaction ... "

The whole idea of an auction is that bidders compete under one set of conditions, and the highest bidder wins.

If the property is passed in, again, it becomes a private treaty sale, and vendor can treat with whoever and however he pleases. Sure, the highest bidder has the right to negotiate first, but vendor can say, 'right, we've negotiated, and your deal is not acceptable - ping off !' He can then do what he pleases, including treat with another buyer, withdraw it from sale ... or whatever !

Cheers
JamesP

 

[Hound Dog]

Hi All,
Apologies for the typographical error. The Date should have been 16/04/05.The auctioneer lost me when he mentioned the ACCC as I am sure he was feeding us b/s.To my knowledge he should have been operating within the rules of the States Agents and Auctioneers Act,of which I am obviously no expert.
I must admit to being biased against Auctioneers after being ripped off at an "antique " auction sevaral years ago. That is another story and really does not belong in this forum .
Thanks for your thoughts and replies
Hound Dog