I don't have any data on the search criteria people use but the general real estate logic that I was exposed to was "the lower the back end price, the more searches it will appear in and the more people are likely to see it". It will depend on the suburb and the agents but in Brunswick, Essendon, Coburg, etc it was very common to have properties appear in searches that had prices well above the maximum.
I just did a search of Brunswick houses with a max price of $550k. Of the 3 properties, all had ranges starting well above this figure including one advertising a private sale of $700,000. I would guess that all 3 properties will sell for more than $650k.
Even though you only need one buyer for a home, most agents want maximum exposure, which is good for their business and will usually end up with the property being sold but it certainly isn't the most ethical way to operate.
I can understand that agents want to drive enquiry but it seems crazy when a $2.1m property won't appear in searches for $2m+ (if the agent has put $1.75m in the back end).
While I'm sure there are buyers that miss properties for this reason, I think most people are more likely to put a strict maximum limit on the search (based on what they can afford) than a strict minimum (who wouldn't want to pay less than their budget?).
e.g. If someone has $2m to spend on a home in Hawthorn VIC, they will probably put a maximum of $2m and maybe a minimum of $1m to reduce the number of properties that come up but they probably wouldn't set the minimum as $1.75m, as they think it might be possible that they find a cheaper property they like.
There are often only 1 or 2 bidders at an auction but to improve the chances of an auction being successful, agents really rely on there being lots of other people there. It helps to give the impression that the property is desirable, lots of people are interested in the property and it creates anxiety in the genuine buyers mind, as they know that any one of the dozens of people could outbid them at the last second.
There is lots of interesting research about online auctions and some of the theories apply to property auctions.
http://insight.kellogg.northwestern.edu/article/place_your_bids/
People are naturally competitive and want to win. It can be difficult to accept that you missed out on your dream home because you didn't bid an extra couple of thousand.
If I'm searching for property on REA, I will usually use the map instead of the list. This negates the premium/featured ads to keep their property at/near the top of the list (which vendors are convinced to pay thousands of dollars for).
