Auction season is in full swing at the moment with real estate agents hammering in For Sale signs quicker than they can be pulled up in the traditional rush to sell before Christmas and getting ready for the summer season.
It’s the season of extensive advertising campaigns, fish eye lens photos and home open signs every Saturday. Unfortunately, for a few, it’s also the time for underhand sales strategies.
To get to the bottom of the big issues facing auction goers and some tips for making a prudent purchase, I caught up with independent property guru Louis Christopher.
“Most agents do the right thing, but it is a very high profile sector so everyone gets a wrap when problems are identified,” Christopher says.
The latest of these to hit the headlines is the practice of baiting. That is, advertising a property well below its reserve price to attract potential buyers along to auction.
“There’s a serious moral issue in baiting potential homebuyers to auction because they go out and spend money paying for property inspections, only to find they’ve been enticed into it and it is in fact well out of their price bracket,” Christopher says.
“It’s a very common practice and has been happening for as long as I can remember.”
Last month the South Australian government clamped down on this by passing legislation restricting reserve prices to no more than 10% above the advertised price. It’s a move applauded by most independent property observers, as Christopher notes “it’s good legislation, plain and simple.”
However agents have been quick to reject the idea with industry leaders warning it will lead to lower prices for home sellers because it restricts their ability to lift reserves if there is a lot of interest in a property. But that’s a pretty weak case.
“If there’s a lot of interest, it comes through in the bidding of the auction and the best price will be achieved. There’s not a lot to that argument,” Christopher weighs in.
The other big blight on the auction scene in recent times has been dummy bidding, where friends or associates put in false bids to up the ante on auction day. Thankfully Fair Trading has been cracking down with agents on the road attending auctions to stamp out the practice.
However despite the authorities’ best efforts and legislators putting the foot down in South Australia at least, at the end of the day buyers still need to look out for themselves.
“Regular communication with the agent to work out where the reserve is roughly at is your best defence against baiting. Only after you’ve got some idea of what the seller will accept and confirmed that it’s in your price range should you go ahead with property inspections,” Christopher advises.
“And if you’re still in the game then, make sure you have finance approved before auction day.”In terms of auction day tactics, everyone has a different ‘hot tip’...bid late... go hard early...say nothing until the property is on the market...
But there really is no tried and tested formula. Christopher says the most important thing is composing yourself and staying within your limits, and if you can’t then to get some help.
“There are a whole range of auction tactics around, but if you don’t have the temperament yourself, buyers agents do it for a living and can be a good option to bid on your behalf,” Christopher says.
And if you feel at any point that you might have been the victim of dummy bidding, baiting, an unlicensed auctioneer or any other suspicious circumstances, contact Fair Trading and let them know.As Christopher re-iterated to me, most agents do the right thing, but those few that don’t need to be brought back in line.