It really interesting to see how things evolve, isn’t it?

In a previous article, I spoke of the new legal requirement for real estate salespeople to give a price range to a seller whenever they listed a property for sale and wondered how this would be handled, especially where the salesperson was targeting the property for an auction.

I believe we now have an answer to that question – some salespeople with other companies are tending to giving as wide a range as they can – to the point where the information to the sellers is almost meaningless. Ranges of $100,000 are common, apparently. Think of a property worth, say, $400,000. It would seem that they are being advised that their property is worth, say somewhere between $350,000 and $450,000. Totally truthful (maybe) but totally useless.

Meanwhile, on the auction front, readers may be interested to know that at least one real estate company has developed a new twist for auctions. This one involves offers made prior to auction date.

According to what we have been told (by more than one person, I might add), what happens is this:

The property is put up for sale by Auction and a date for the actual auction is decided. The marketing is paid for and organised and potential buyers are shown through the property. When a buyer decides that they like the property, they are encouraged to make a pre-auction offer.

Now I have to emphasise that usually, in my experience, a pre-auction offer is probably the best offer that a seller is going to get as the buyer wants to preempt the auction and to achieve ownership of the property. So much so that if sellers turn down such a pre-auction offer, the buyers are likely to be bidding at the auction and quite frequently are able to buy the property at a price that is less than the amount of their pre-auction offer. This is because, at the auction, they are able to see what the competition is and bid to just beat that.

At the auctions I am talking about, however, the very opposite is happening. The buyers, who are encouraged to make an offer, are also encouraged to make the offer a low one – which is, naturally, turned down by the sellers. The sellers are then encouraged to bring the auction forward, presumably on the basis that ‘these are hot buyers and you wouldn’t want them buying something else, would you?’; the buyers being told, meanwhile that the agency is going to try to get the sellers to do this as it will lessen the amount of competition that the buyers will face.

Lo and behold, the (amended) date of the auction arrives and the bidding is started at the same level as the rejected pre-auction offer. The previous buyers are there and they bid to a level higher than their previous (deliberately low) offer and that offer is accepted by the sellers. So – everybody is happy! The buyers have the property, the sellers think that the agency has done well to get the sellers to pay more than their initial offer and the agency makes a commission and comes up smelling of roses.

However, not everybody is happy! I know of one instance where the altered auction date resulted in possible bidders not being able to attend and bid. This means that the owners of that property were possibly deprived of the opportunity to receive a higher price, so if they read this, they probably won’t be happy either.

I know that the immediate response of the agency concerned will be to say that the affected bidders could have made phone bids. Well, yes, of course they could have, but I certainly wouldn’t bid for something as expensive as a house via a phone and I suspect that there will be many others who feel the same way. In this particular case, however, the change of date meant that the would-be bidders were denied the chance to even view the property, let alone bid on it.

Again, we see how the auction process has been used to obtain what is best for the agency and its salespeople, not what is best for its clients and customers.