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Transparency of auctions

Discussion in 'Real Estate' started by Jacque, 29th May, 2007.

  1. Jacque

    Jacque Team InvestEd

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    Many owners who favour auctions take their properties all the way, relying on the "transparency" and emotion of the buyers on the day to get them the best result (amongst other factors). However, I've had two experiences in recent weeks to demonstrate that the best price isn't always necessarily had by going all the way to auction.

    1. My clients saw the property, and though we attempted to make an offer prior, it soon became clear that the vendors didn't want to take offers due to the increasing interest. The property subsequently went to auction, with us managing to secure it for less than both the reserve and our clients maximum limit. Had the vendor accepted an offer prior, however, they would have been up some $20K - our buyers were ecstatic and needless to say, the auction (as well as post negotiations) went our way :)

    2. Second example is a colleague who wanted a property so desperately when they viewed it and was prepared to offer a very attractive price for what I considered as "exceeding expectations" yet the offer was knocked back two weeks prior. Two days before the auction, however, another property came up that was directly comparable and they subsequently "cooled off" on the intial property, so much so that they decided to dampen down their bidding on the first property. The auction proceeded, got passed in and they ended up purchasing the second property (private treaty) at a similar price to what they were prepared to pay for the first.

    From my experience, vendors need to "strike when the iron is hot"- in other words, act on strong interest and don't hold out for a higher price when it may not be necessarily forthcoming. A lot can happen, in between the days waiting for the auction to take place, and it may well be worth considering a good offer in the days leading up.
     
  2. Sultan of Swing

    Sultan of Swing Member

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    Agree Jacque

    I've seen both scenerios happen more than once. It's part of the reason I'm generally against auctions. This is coming from an auctioneer!:rolleyes:

    I think auctions have their place and in a hot market I sometimes recommend them, otherwise private treaty is a good way to go.
     
  3. Jacque

    Jacque Team InvestEd

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    Hi SOS- nice to see you here and I look forward to your valuable contributions - always enjoy reading your posts!!

    How is the Tassie market going? I see you've been busy with renovations and JV's- busy man :)

    Does your end of town seem to attract auctions or is it restricted to high end and unique stock?
     
  4. Sultan of Swing

    Sultan of Swing Member

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    We don't have many auctions here at the moment. The last few we've done hve been either deceased estates or mortgagee sales.

    I'd recommend them for unique properties but there aren't many of those coming up for sale or when they do, the vendor doesn't want to auction it.

    Cheers
     
  5. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Jacque, interesting to read your example of where your client tried to make an offer pre auction and was knocked back. End result is they purchased home less than reserve.

    Isn't it interesting that most Sunday newspapers and local Real Estate flyers NEVER mention these stories ? You only hear about the ones that ALWAYS are sold well above reserve. So high above reserve that it would make most think they were silly not to sell via an auction.

    No doubt the media can manipulate and play with people's emotions here and they do. Do others agree ?
     
    Last edited by a moderator: 13th Jun, 2007
  6. Jacque

    Jacque Team InvestEd

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    I agree 100% but perhaps the most substantial reasoning for only the "over reserve" stories being published is that there's not many owners out there willing to let the general public know of their loss- along with the agents that perpetuated it!
     
  7. shake-the-disease

    shake-the-disease Well-Known Member

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    Before my PPOR went officially on the market (to auction) I had an early offer of $830k. I would have accepted $860k. The buyer wouldn't budge though and neither would I.

    6 weeks latter at auction I got over a million. :)

    This was in a rising market. I think the lesson is to very wary of accepting early offers in a hot market.
     
  8. PiggyBank

    PiggyBank Member

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    Yes, I think its foolish to accept any pre-offers in hot market. In suburbs I was looking in Melbourne I think some of the vendors were using pre-offers to make up their mind regarding the reserve price. In the ad it said vendors are interested and then when I spoke to the agent he said email me a number. I thought pre-offer was meant to be done with a cheque and the contract signed so I didn't bother. Anyway the house went for more than I was prepared to pre-offer.

    Auction enviroment clouds the thinking and buyers keep bidding till their limit and then some more. But when you have to sit down, write a figure and sign a cheque, your offer will be measured.

    PB
     
  9. Jacque

    Jacque Team InvestEd

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    And too late at that stage to suffer buyers remorse :D
    As humans, however, even when our gut feeling tells us we've made a mistake, we will generally go to some lengths to justify our price to others. Nature of the beast- and something to do with pride!