The most deceptive method used to sell property in Australia is public auction.
For the agent, public auctions are all about the advertising revenue and the profile it buys. The real estate industry and major media organisations widely promote public auctions.
Significant spend accompanies a public auction – through the vendor-paid marketing campaign.
Public auctions are sold to the real estate consumer as a transparent system of sale. Each buyer gets to compare their bid to those of opposing bidders and is given the option of raising their bid, providing the opportunity to be the highest bidder and eventual buyer. The seller gets competitive bidding by all buyers.
A transparent system fair for all? No.
For starters, the public auction system uses comparative bidding, not competitive bidding.
In a real estate transaction, the much-touted transparency of a public auction will only ever benefit the buyer, and even then, only on auction day. By having the capacity to compare bids, the eventual buyer will rarely pay their maximum. Thus, the seller rarely achieves a sale at the highest price.
While the public auction method certainly costs the seller both financially and emotionally, the buyer is also deceived. The transparency only applies on auction day. During the lead-up to a public auction, the lack of transparency of the process makes it difficult for the property buyer.
Peter and Vi were recently looking to buy a property in Brisbane. They proceeded with an inspection and conducted further research and investigations after being assured by the agent that the property was within their $750,000 budget.
The evening before the auction, the agent called. “Look, I’m a little shocked, but the owners have set a really low reserve. I encourage you to be there tomorrow.” This was a complete fabrication designed to ensure a crowd at the auction.
No crowd, no chance of a sale.
At the auction, bidding started at $650,000 – things were looking good for Peter and Vi. However, the price quickly raced past $750,000 and well into the $800,000s. At $870,000, the bidding stopped, an incredible $120,000 above their budget and yet still not at the seller’s reserve.
Australian buyers are placed in this position every weekend, convinced by agents to spend valuable resources on a property that they have no hope of buying.
Public auctions need buyer activity for success. No buyer activity, no sale.