Auctions

[Ausvisitor]

Why are auctions so popular in Australia, and why are real estate agents so bl**dy useless at giving sensible guide prices?

I mean they've only got one job, look at some bricks and say what it's worth, how can they be so bad at it?

[Marisawright]

Because it's all a rort and a sales tactic.   The agents are not useless, they've been trained to do it.  Underquoting is deliberate.  They are counting on the fact that you'll be tempted by the low estimate to attend the auction, then in all the excitement of the bidding, you'll be willing to bid way above that figure. 

It's called 'bait pricing' and they've tried to make it illegal, but it's still widespread.  Australians are used to it now, they know that the figure the seller wants is way above what the agent estimates.  Anyway, people have to get pre-approvals these days so they can't get carried away with bidding. 

There was a real estate agent called Neil Jenman who ran a big crusade against it about 20 years ago. His website is still there but I don't know how active he is nowadays.

https://jenman.com.au/major-network-to-cease-bait-pricing/

[Skani]

10 hours ago, Ausvisitor said:

Why are auctions so popular in Australia, and why are real estate agents so bl**dy useless at giving sensible guide prices?

I mean they've only got one job, look at some bricks and say what it's worth, how can they be so bad at it?

I know auctions are popular in Sydney and Melbourne but I'm not sure if it is country wide.  I know here in Tasmania, for example, there were 112 property sales throughout the entire state last week and not one was an auction sale.  

As Marisa said, it's a deliberate sales tactic.  Here's a very relevant article  from just 2 days ago - https://www.theguardian.com/business/2022/aug/27/underquoting-in-australian-real-estate-industry-is-leaving-buyers-feeling-betrayed

[beketamun]

14 hours ago, Ausvisitor said:

Why are auctions so popular in Australia, and why are real estate agents so bl**dy useless at giving sensible guide prices?

I mean they've only got one job, look at some bricks and say what it's worth, how can they be so bad at it?

if you went to the auction, they're good at it....it is a very sophisticated and quick market, none of this 6 months to sell a house nonsense.

It will interesting to see how things might change in a dropping market.  Our last house was bought off-market, we sold at higher than asking price and gave them 90 days to complete. 

If you know the area you want, might be worth making friends with a few real estate companies and getting on a list for early viewings and telling them what you're looking for.  Sometimes people don't want to hold auctions or pay for advertising, they just want rid...they'd be expecting a quick sale with little hassle/haggle.

 

Edited August 29, 2022 by beketamun

[Marisawright]

40 minutes ago, beketamun said:

if you went to the auction, they're good at it...

They are good at it, but it's designed to get houses off the agent's books quickly, NOT to get the best price.  For the agent, an auction lets them get a property on and off their books within six weeks, AND the seller pay all the advertising and all the fees.  Whereas if you opt for an ordinary sale, they have to keep advertising at their expense until it's sold, and they have to keep supplying staff to conduct inspections, and that can go on for weeks or months -- because the owner is holding out for the price they really want.

It works like this:

• Agent views the house and tells you it will definitely sell for the price you want.
• He talks you into selling by auction, saying it's the best way to build excitement, people get carried away and bid more, etc etc
• They run a six-week campaign.  During this campaign, the home is open for inspection at least once a week.  After each inspection, he contacts you to tell you all the NEGATIVE things that potential buyers have said, and tells you about all low price estimates people gave him (which they did because he told them a low figure, of course).
• Auction day arrives.  Just before the auction, he asks you what reserve price you want to set.  If (as you probably will) you nominate a price he thinks is too high, he'll remind you of all the negatives people came up with.  Bythis time you're losing confidence in your price anyway, so you may agree to set it a bit lower.
• The auction proceeds. The property doesn't meet reserve.  The auctioneer announces they're going to consult the seller.  The agent comes and tries to sweet-talk you into lowering the reserve, while his sidekick goes and tries to talk the bidder into increasing his bid.
• The bidder increase his bid. The agent standing beside the seller gives another pep talk.  Ditto the agent with the bidder. Eventually, the seller goes, "Oh f***, I just want to get this over with" and agrees to put the property on the market.

To sum up:  because the bidder was given a low estimate before the auction, he's peeved because he bid more than he wanted.  Whereas the seller is peeved because he got less than he really wanted.  The agent says, "Well, you can only sell for what the market value is at the time", which is total nonsense.

Edited August 29, 2022 by Marisawright

[beketamun]

49 minutes ago, Marisawright said:

They are good at it, but it's designed to get houses off the agent's books quickly, NOT to get the best price.  For the agent, an auction lets them get a property on and off their books within six weeks, AND the seller pay all the advertising and all the fees.  Whereas if you opt for an ordinary sale, they have to keep advertising at their expense until it's sold, and they have to keep supplying staff to conduct inspections, and that can go on for weeks or months -- because the owner is holding out for the price they really want.

It works like this:

• Agent views the house and tells you it will definitely sell for the price you want.
• He talks you into selling by auction, saying it's the best way to build excitement, people get carried away and bid more, etc etc
• They run a six-week campaign.  During this campaign, the home is open for inspection at least once a week.  After each inspection, he contacts you to tell you all the NEGATIVE things that potential buyers have said, and tells you about all low price estimates people gave him (which they did because he told them a low figure, of course).
• Auction day arrives.  Just before the auction, he asks you what reserve price you want to set.  If (as you probably will) you nominate a price he thinks is too high, he'll remind you of all the negatives people came up with.  Bythis time you're losing confidence in your price anyway, so you may agree to set it a bit lower.
• The auction proceeds. The property doesn't meet reserve.  The auctioneer announces they're going to consult the seller.  The agent comes and tries to sweet-talk you into lowering the reserve, while his sidekick goes and tries to talk the bidder into increasing his bid.
• The bidder increase his bid. The agent standing beside the seller gives another pep talk.  Ditto the agent with the bidder. Eventually, the seller goes, "Oh f***, I just want to get this over with" and agrees to put the property on the market.

To sum up:  because the bidder was given a low estimate before the auction, he's peeved because he bid more than he wanted.  Whereas the seller is peeved because he got less than he really wanted.  The agent says, "Well, you can only sell for what the market value is at the time", which is total nonsense.

Yep, I know.  As you've described it is very sophisticated.

I bought at auction once, wont bother again.  Last one i sold we refused to auction and the real estate guy was superb, had a great strategy.  We were goiing to sell at 825 and one up the street went up for 888 (to attract the Chinese), so we held off for a few weeks, let them do all the viewings.   As soon as they went "under offer" we put ours up for 900 and it sold 30 miins after the first viewing.  Pre-pandemic though, wiith low interest rates.  But a changing market will change strategies.