Negotiation between buyers during Auction

[divine]

So this is how the story goes:

I was in an auction last Saturday, with just 2 registered bidder including myself. Bidding war between the two of us went for 10 minutes and from what I gathered from the auctioneer/agent, it is no where near the reserve yet (my estimate - 100k under the reserve). I decided to just give up unless the property is put on the market, which it did. Auction went for another 10 minutes before it was sold to the other bidder for around 50k above the 'on the market' price.

I was just thinking after the fact, why didn't I just try to negotiate with the other buyer when it was put on the market? The missus thinks that the other bidder was acting uncertain and approaching their limit too. If we have just acted confident, talk to the other bidder and try to spook them, it could have saved either of us 50k once it was on the market. What would I lose? Apart from ******* the agent off or make a fool out of myself if it fails.

Have anyone tried something like this and worked? Or is it just pure fantasy?

 

[wylie]

I'm unsure just what you mean by your suggestion about "negotiating" with the other buyers. Then you suggested trying to spook them. Do you now wish you had been more forceful and confident and won? Or are you happy that the other buyer paid $50K over the reserve?

 

[Big Will]

I decided to just give up unless the property is put on the market, which it did. Auction went for another 10 minutes before it was sold to the other bidder for around 50k above the 'on the market' price.

I don't understand either

Who was bidding against the other bidder as you said only two? Or was the purchaser just raising his own bid which is their own stupid fault...

Otherwise how does an auction go for 10 minutes after it is on the market with only 1 bidder?

 

[Macca]

I would suggest the auctioneer would draw your attention to the clause which states that bidders will not collude and would tell both of you to desist !

 

[mumbai]

Otherwise how does an auction go for 10 minutes after it is on the market with only 1 bidder?

I have been to an auction going on for more than 30 minutes with one bidder
The agent kept going to the vendor every 5 minutes with the new bid from the only bidder!

 

[divine]

I would suggest the auctioneer would draw your attention to the clause which states that bidders will not collude and would tell both of you to desist !

If there is some regulations against that, that is probably the answer I am looking for.

Sorry that I didn't explain myself very well. I did bid 2 or 3 times after it was on the market.

My intention was more of wanting to know if there is anything against bidder colluding to lower the initial reserve price. And once it is on the market, if I talked to the other bidder and understand their circumstances, I might just give up earlier or the other way round.

 

[Propertunity]

If there is some regulations against that, that is probably the answer I am looking for.

The regulations against it, are here: http://www.austlii.edu.au/au/legis/nsw/consol_act/psabaa2002385/s78.html

 

[divine]

The regulations against it, are here: http://www.austlii.edu.au/au/legis/nsw/consol_act/psabaa2002385/s78.html

Thanks. On the other hand, is there something that stops seller from setting ridiculous reserve and decide whether to sell the property on the spot? Like for example setting a reserve that is 50% more then market price.

I had this feeling on another auction as the agent was visibly disinterested and told me that the reserve was a lot higher then he expected. That property was passed in in the end.

 

[vaughan]

I sold a property by auction recently (an IP) on the Central Coast.

TBH the market has moved so quickly that I had no idea what the property would sell for. I initially thought that $340k would be OK, then by the time I got round to selling it appeared that $350k would be fair; it ended up selling for $390k.

The strategy I had with the auctioneer was to set the reserve "too high" at $400k. That way, when the bidding ground to a halt (at around $380k, which I was happy to sell for TBH) the auctioneer stopped the proceedings, consulted with me, then was able to announce "The property is on the market!" It was very theatrical, re-invigorated the auction and got another $5k out of the buyers.

I was laughing all the way to the bank. Happily, the new owners were also very happy, they thought they'd paid a good price. Win-win.

 

[cu@thetop]

I'm unsure just what you mean by your suggestion about "negotiating" with the other buyers. Then you suggested trying to spook them. Do you now wish you had been more forceful and confident and won? Or are you happy that the other buyer paid $50K over the reserve?

Perhaps pay the other buyer $1000 to stop bidding.

I would suggest the auctioneer would draw your attention to the clause which states that bidders will not collude and would tell both of you to desist !

Not sure if a clause would be binding in the sense that what is the seller's remedy? Not to sell to you? They always had that choice anyway.

If there is some regulations against that, that is probably the answer I am looking for.

Not in Queensland that I'm aware of.

The regulations against it, are here: http://www.austlii.edu.au/au/legis/nsw/consol_act/psabaa2002385/s78.html

The paying of money to a competitor to cease bidding would not seem to be covered by this.

 

[Macca]

More info for NSW

<<A spokeswoman for NSW Fair Trading said collusive bidding was illegal under NSW legislation. Penalties can be up to $55,000 for corporations. Real estate agents can lose their licences.

Regulations state that a person must not induce another person to abstain from bidding or do anything in any way which may prevent free and open competition, she said. Fair Trading has received 55 complaints about auctions so far this year seven for alleged dummy or collusive bidding.>>

http://www.afr.com/p/national/buyers_dirty_auction_tricks_exposed_fUcTgsHwP88nAb6vLujfdM

 

[Big Will]

Thanks. On the other hand, is there something that stops seller from setting ridiculous reserve and decide whether to sell the property on the spot? Like for example setting a reserve that is 50% more then market price.

I had this feeling on another auction as the agent was visibly disinterested and told me that the reserve was a lot higher then he expected. That property was passed in in the end.

A vendor has the right to sell his property at whatever price he feels it is worth, how would you like it if I said you must sell me your car for $1?

A vendor can set a reserve for a 1m2 block of land in the middle of Australia for $1M, I don't know what agent would take on the list (one the size and two the price the vendor wants is going to be a looooooooooong sales process). End of the day a property is only worth what someone else is willing to pay and the other person is willing to accept.

 

[neK]

More info for NSW

<<A spokeswoman for NSW Fair Trading said collusive bidding was illegal under NSW legislation. Penalties can be up to $55,000 for corporations. Real estate agents can lose their licences.

Regulations state that a person must not induce another person to abstain from bidding or do anything in any way which may prevent free and open competition, she said. Fair Trading has received 55 complaints about auctions so far this year seven for alleged dummy or collusive bidding.>>

http://www.afr.com/p/national/buyers_dirty_auction_tricks_exposed_fUcTgsHwP88nAb6vLujfdM

Its all well and good for the vendor to do this? But not ok for the buyer to do this. Ha!

What about the non disclosing of reserve and under quoting so you have these poor buyers getting B&P reports with no chance of even winning.

 

[Macca]

Its all well and good for the vendor to do this? But not ok for the buyer to do this. Ha!

What about the non disclosing of reserve and under quoting so you have these poor buyers getting B&P reports with no chance of even winning.

I agree Nek but the if we are going to attend the dance we need to know the steps

 

[neK]

I agree Nek but the if we are going to attend the dance we need to know the steps

Agreed.
What got me was the comment in the article

"The vendor would be furious, of course. ?It?s illegal, but very hard to police,? said Rich Harvey, chief executive of Sydney buyer?s agent, propertybuyer.com.au, who slammed the ploy."

Typical human nature really. Its all good if it benefits you. But the moment it goes against you its an outrage.

 

[divine]

A vendor has the right to sell his property at whatever price he feels it is worth, how would you like it if I said you must sell me your car for $1?

A vendor can set a reserve for a 1m2 block of land in the middle of Australia for $1M, I don't know what agent would take on the list (one the size and two the price the vendor wants is going to be a looooooooooong sales process). End of the day a property is only worth what someone else is willing to pay and the other person is willing to accept.

I know, hence the reason I haven't been doing B&P for auctions after getting burnt a couple of times. Not a good idea, but I really can't spend 1k every week just for B&P as we do try for 2 or 3 houses everytime.

 

[Big Will]

Yeah agree it can get really annoying however why are you missing out on properties?

If the property goes for more than you expected, why? Sometimes it can be a freak but usually it is something you should have a fair idea what the property is worth by your research (don't rely on the agent). On the day I bought my place there was a house in the same street also up for auction. Mine was advertised $500,000 plus and the other house was advertised $360,000 plus.

There was some differences as mine was renovated, had 2 baths (not 1) and had an extra bedroom plus study.

My place went to auction first and about 30 people turned up (including neighbours) and I was the only one who bidded. I am guessing the $360,000+ property really hurt this one. I was happy and got it mine for $510,000 and had a bank value before auction which said $530,000 as a conservative value and I thought $550,000 is where value is.

The other property I thought would go for $430,000 - $440,000 and there was over 100 people maybe 150 people (no joke) but ended up selling for $467,500.

The cost of the extension on my property was $60,000 (1 bath 2 bed) which means my property was a really great deal for me as there was no competition however the $360,000 went really well as there was so many people bidding which caused the price to go up.