House Auctions

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t0ny

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#154324 24-Oct-2014 12:27

My father in law has been looking at buying a house and i have gone along with him to a few auctions. One thing that struck me is the way the auctions and the auctioneers play the market in terms of house prices. It seems pretty standard for the real estate agents to line up next to every bidder and pressure/encourage them to bid that extra 500-xxxx dollers to win the auction which pushes the price of house up. The auctioneers also play with words and timing to get people to bid.

I guess that is what they are supposed to do but isnt there a code of conduct or ethics these auctions need to run according to? The last auction i went to had the father in law bidding against another person and that person had given up but the real estate agents kept pushing him to bid and managed to get him to bid another 5k even though he didnt want to.

This is good for sellers as they get a higher price for their house but i dont see how it could be good for buyers who are struggling to buy their first house.

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#1161340 24-Oct-2014 13:03

At the end of the day its only worth what someone is willing to bid upto and pay.

meesham

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#1161347 24-Oct-2014 13:14

The last auction i went to had the father in law bidding against another person and that person had given up but the real estate agents kept pushing him to bid and managed to get him to bid another 5k even though he didnt want to.

Unless the auctioneer had a gun to their head I don't see how they've made a bid that they didn't want to. For people with no impulse control an auction is not a place for them to be.

This is good for sellers as they get a higher price for their house but i dont see how it could be good for buyers who are struggling to buy their first house.

I doubt there's many first home buyers at an auction, I know when I was buying my first house there was no way I was going to buy at auction (way too scary) - and depending on what type of property you're selling an auction can be bad as you're limiting the number and/or type of people who will buy because it's an auction. I've since sold a place at auction and would probably do it again, it's nice that it's an instant unconditional sale (although you still get people trying to play games before the auction itself).

davidcole

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#1161353 24-Oct-2014 13:28

t0ny: My father in law has been looking at buying a house and i have gone along with him to a few auctions. One thing that struck me is the way the auctions and the auctioneers play the market in terms of house prices. It seems pretty standard for the real estate agents to line up next to every bidder and pressure/encourage them to bid that extra 500-xxxx dollers to win the auction which pushes the price of house up. The auctioneers also play with words and timing to get people to bid.

I guess that is what they are supposed to do but isnt there a code of conduct or ethics these auctions need to run according to? The last auction i went to had the father in law bidding against another person and that person had given up but the real estate agents kept pushing him to bid and managed to get him to bid another 5k even though he didnt want to.

This is good for sellers as they get a higher price for their house but i dont see how it could be good for buyers who are struggling to buy their first house.

Ifs no different from a regular negotiation where the agent is trying to get you up. They are and always have been for the seller. Its just all the buyers are in one place.

And as others have pointed out, its up to the buyer to set their limit they will and can pay.

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Geektastic

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#1161366 24-Oct-2014 14:01

t0ny: My father in law has been looking at buying a house and i have gone along with him to a few auctions. One thing that struck me is the way the auctions and the auctioneers play the market in terms of house prices. It seems pretty standard for the real estate agents to line up next to every bidder and pressure/encourage them to bid that extra 500-xxxx dollers to win the auction which pushes the price of house up. The auctioneers also play with words and timing to get people to bid.

I guess that is what they are supposed to do but isnt there a code of conduct or ethics these auctions need to run according to? The last auction i went to had the father in law bidding against another person and that person had given up but the real estate agents kept pushing him to bid and managed to get him to bid another 5k even though he didnt want to.

This is good for sellers as they get a higher price for their house but i dont see how it could be good for buyers who are struggling to buy their first house.

I am at a loss to understand why you think the needs of the buyers are relevant in that situation.

The auctioneer does not work for them....

khull

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#1161375 24-Oct-2014 14:04

Also don't forget that auctions usually carry the term of unconditional offers which means winning bidder must settle immediately. Sellers love it because it will most likely go in the super heated Auckland market, and exceptionally great if you are trying to rid a problematic problem e.g. leaky home due to the unconditional terms.

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#1161377 24-Oct-2014 14:07

Out of interest, I used to be a qualified valuer in the UK and this is the RICS Red Book (the 500 page statutory manual on the subject) definition of market value:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

One of the differences between NZ and the UK is that almost no property will be sold without at least one genuine valuation (i.e. not a guess by a useless estate agent!) because no bank in the UK will lend you a bean until they have had the house surveyed and valued to determine if it is in good order and worth enough to cover the loan.

Considering the very high fees agents charge here, their level of skill and ability is generally pretty poor IME, especially when it comes to valuation.

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#1161383 24-Oct-2014 14:09

khull: Also don't forget that auctions usually carry the term of unconditional offers which means winning bidder must settle immediately. Sellers love it because it will most likely go in the super heated Auckland market, and exceptionally great if you are trying to rid a problematic problem e.g. leaky home due to the unconditional terms.

Although selling something you know is a leaky home and failing to disclose that fact could well get you into trouble, I imagine.

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#1161417 24-Oct-2014 14:31

in Australia they have professional bidders. just you wait till it comes to that.

mattwnz

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#1161421 24-Oct-2014 14:37

I would never buy a house at an auction, as you have to make sure you have done full due diligence before hand, such as building inspections, lawyer checking everything, lim etc. So you are down probably more than 2k before you even put in a bid. Auctions though can be good for sellers when there is a lot of interest in the property. Tenders are also not great for buyers, although unlike an auction, you can put in conditions on the tender.

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#1161427 24-Oct-2014 14:39

joker97: in Australia they have professional bidders. just you wait till it comes to that.

That is like shrill bidding which is forbidden on trademe. It is similar to auctioneers taking bids off the wall. Potentially it is misleading, as those buyers never exist, and it gives a false impression. Hopefully that sort of practice doesn't come here, I already have a pretty low impression of the real estate industry on NZ.

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#1161429 24-Oct-2014 14:44

joker97: in Australia they have professional bidders. just you wait till it comes to that.

in the states they have proper commissioned buyer agents (not sure who they're paid from).

They actually seem to work to get the cheapest deal. And in most states (CA exempt) the agent isn't allowed to work both sides of the deal.

But have seen some dodgy practices. In a multi offer situation, 2 offers presented, one for over the asking price, the other below....vendor took the higher one (of course), then at inspection time, took dollars off in "repair credits" till it was under the other lower offer. Apparently a technique.

Admittedly it was on that reality show million dollar listings....but if you want some idea of bits the US real estate market, watch season one....where they show getting the deal, and the conditional stage etc. Later seasons they only care about the deals and the dollar amounts.

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#1161506 24-Oct-2014 16:24

davidcole:
joker97: in Australia they have professional bidders. just you wait till it comes to that.

in the states they have proper commissioned buyer agents (not sure who they're paid from).

They actually seem to work to get the cheapest deal. And in most states (CA exempt) the agent isn't allowed to work both sides of the deal.

But have seen some dodgy practices. In a multi offer situation, 2 offers presented, one for over the asking price, the other below....vendor took the higher one (of course), then at inspection time, took dollars off in "repair credits" till it was under the other lower offer. Apparently a technique.

Admittedly it was on that reality show million dollar listings....but if you want some idea of bits the US real estate market, watch season one....where they show getting the deal, and the conditional stage etc. Later seasons they only care about the deals and the dollar amounts.

In the US both parties usually have agents and each pays their own bill I think. My brother in California says it works quite well.

We are currently negotiating with an agent here to sell our place - their opening commission suggestion would have seen us handing them $40,000! And of course they expect us to pay for advertising on top - another $7,000.

Elpie

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#1161525 24-Oct-2014 16:41

Geektastic:
davidcole:
joker97: in Australia they have professional bidders. just you wait till it comes to that.

in the states they have proper commissioned buyer agents (not sure who they're paid from).

They actually seem to work to get the cheapest deal. And in most states (CA exempt) the agent isn't allowed to work both sides of the deal.

But have seen some dodgy practices. In a multi offer situation, 2 offers presented, one for over the asking price, the other below....vendor took the higher one (of course), then at inspection time, took dollars off in "repair credits" till it was under the other lower offer. Apparently a technique.

Admittedly it was on that reality show million dollar listings....but if you want some idea of bits the US real estate market, watch season one....where they show getting the deal, and the conditional stage etc. Later seasons they only care about the deals and the dollar amounts.

In the US both parties usually have agents and each pays their own bill I think. My brother in California says it works quite well.

We are currently negotiating with an agent here to sell our place - their opening commission suggestion would have seen us handing them $40,000! And of course they expect us to pay for advertising on top - another $7,000.

Talk to at least three different agencies and consider carefully what you get for your advertising/promotion costs. Agents advertise anyway, so find out what promotion is included if you don't opt for an advertising package. Between their standard property press type ads, their own website, and the general real estate site you may get enough advertising without paying much more. Agents that still have deals in place with TradeMe are able to list a house on TradeMe for around $50. Depending on your market you may not need to spend more than a couple of half-page property press type ads, around $1,000.

Very best of luck. I've got my house on the market and am gutted by what is happening in the provinces. I'm going to lose big time on this house.

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#1161540 24-Oct-2014 16:43

Elpie:
Geektastic:
davidcole:
joker97: in Australia they have professional bidders. just you wait till it comes to that.

in the states they have proper commissioned buyer agents (not sure who they're paid from).

They actually seem to work to get the cheapest deal. And in most states (CA exempt) the agent isn't allowed to work both sides of the deal.

But have seen some dodgy practices. In a multi offer situation, 2 offers presented, one for over the asking price, the other below....vendor took the higher one (of course), then at inspection time, took dollars off in "repair credits" till it was under the other lower offer. Apparently a technique.

Admittedly it was on that reality show million dollar listings....but if you want some idea of bits the US real estate market, watch season one....where they show getting the deal, and the conditional stage etc. Later seasons they only care about the deals and the dollar amounts.

In the US both parties usually have agents and each pays their own bill I think. My brother in California says it works quite well.

We are currently negotiating with an agent here to sell our place - their opening commission suggestion would have seen us handing them $40,000! And of course they expect us to pay for advertising on top - another $7,000.

Talk to at least three different agencies and consider carefully what you get for your advertising/promotion costs. Agents advertise anyway, so find out what promotion is included if you don't opt for an advertising package. Between their standard property press type ads, their own website, and the general real estate site you may get enough advertising without paying much more. Agents that still have deals in place with TradeMe are able to list a house on TradeMe for around $50. Depending on your market you may not need to spend more than a couple of half-page property press type ads, around $1,000.

Very best of luck. I've got my house on the market and am gutted by what is happening in the provinces. I'm going to lose big time on this house.

Yes, we expect to be lucky to get the RV to be honest. If only the Reserve Bank would discover that there is a world outside Auckland...!

We fully expect our buyer to come from the UK or the USA so we need to use an agent that has marketing tie-ups with firms there too - and selling seven figure property in the provinces is very hard indeed!

Elpie

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#1161542 24-Oct-2014 16:47

Geektastic:
One of the differences between NZ and the UK is that almost no property will be sold without at least one genuine valuation (i.e. not a guess by a useless estate agent!) because no bank in the UK will lend you a bean until they have had the house surveyed and valued to determine if it is in good order and worth enough to cover the loan.

That's happening in NZ now too. It might not be happening so much in Auckland in Christchurch where a shortage means jumping in fast if you find the right property but certainly in other places banks are insisting on a registered valuation and building inspection.
The sad thing for sellers is that it's not worth getting a registered valuation in order to set a price. Buyers tend to look at RV and base their prices a certain percentage below RV because the media has filled them with the idea that prices in the provinces have dropped since the last general rating valuations. Everybody wants a bargain.

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