The Auction Process De-Constructed

What a charade the auction proces is - an absolute means to belt buyers or sellers to cop extremes either way, and also makin gou tis is a premiewer way of sellin gin southern sttaes - this series of articles brings to life the lie in all these claims.

The Auction process de-constructed


A SERIES OF ARTICLES SAYING IT AS IT IS

Reserve prices scrutinised
Date November 20th 2012
Talking Property

The auction season might have only a few weeks to go before winding up for Christmas but there has been plenty of attention on the process – and in particular the issue of price guides – in the last week.
Following a blitz in NSW, which involved Fair Trading officers in that state turning up to real estate businesses unannounced and attending 20 weekend auctions, up to five agents remain under investigation for breaches to the fair trading requirements of the Property Stock and Business Agents Act 2002.

The investigators were targeting illegal practices such as deliberately under-quoting to potential buyers, over-pricing to vendors and dummy bidding.
News of whether the agents will be fined or issued with a warning was not available at the time of writing.

In South Australia reserve prices at auctions are set to become more transparent if the Weatherill government gets its way.

Last week, South Australia's deputy premier John Rau introduced a bill that will make it against the law for properties to be passed in at a higher price than the reserve, which must be set at no more than 110 per cent of the price acceptable to the vendor, as listed on the contract between the agent and vendor.

That means the vendor will be forced to decide before the property's marketing campaign kicks off just what price they are willing to accept, and stick with it.

While potential buyers won't be privy to a vendor and agent's sales agreement, any mention of a price on marketing materials will give away the reserve price, as the reserve must also be no more than 10 per cent higher than the advertised price.
In announcing the bill, Mr Rau argued "bait pricing" is used by some real estate agents to "unfairly suck in prospective home buyers".

"I have received numerous complaints from homebuyers highlighting the practice of bait pricing," he said. "These laws will stamp out bait pricing and give home buyers an even playing field."

"The government believes that the most effective way of eliminating the practice of bait pricing is to create a nexus between the price sought by, or acceptable to, the vendor and marketing a property based on that price.

"The expectations of the purchaser will be realistically met when the auction of a property is based on advertising that reflects the genuine selling price of the vendor."

Mr Rau rejected the notion that the laws would be unfair to home sellers.

However, the Real Estate Industry of South Australia's general manager of communications Emma Slape argues the changes will disadvantage vendors and scare homeowners away from holding auctions.

"If they have put down that they will accept $500,000 on the day of listing the property, and they've had really strong demand for the property, and they're thinking perhaps we would be able to get $600,000 they won't be able to do that under the laws," Ms Slape says. "They're limited to making that reserve no higher than $550,000 [for example].

"You need two parties to negotiate and we feel that one party is getting their hands tied behind their backs."

Domain.com.au with Sunshine Coast Auction results – as at 28th November 2012

All the voluble agents in the main press claim 60-70-80-90% auction clearance rates.

Somebody is telling porkies vis a vis the Domain graph, unless their clearance rate means at the end of the day, aka private treaty sales clearance rates, so what is the difference?

New online tool reveals top auction suburb
Tuesday, 27 November 2012
Strong homebuyer demand is critical for a successful auction, according to data obtained from a new online tool that reveals the Melbourne suburbs where auctions are the most popular method of sale.

The new online tool, launched by the Real Estate Institute of Victoria (REIV), should help agents and vendors make the decision about the most appropriate sales method for their property, according to REIV CEO Enzo Raimondo.

“The maps clearly show that auctions are the most popular sales method in the inner city whilst in the outer suburbs most sales are conducted privately," Mr Raimondo said. "This in part explains why the median price of a home sold at auction is higher than one sold at private sale, as residential property is much more expensive in the inner suburbs.

“Whilst overall auction sales have represented around 22 per cent of all sales in Melbourne this year, there are some suburbs with a higher number and some with less."

Mr Raimondo said analysis of the data over 2010 and 2011 revealed a trend towards private sales as the level of competition dropped.

“This highlights that auctions work better when there is a high level of demand generally, or for a specific property,” he continued. “When teamed with data showing weekly clearance rates this information is an invaluable and unique resource for all those active in the residential real estate market.”

Mr Raimondo said suburbs which saw more than half the homes sold by auction in 2011 included Elsternwick, Surrey Hills, Armadale, Richmond, Malvern, Northcote and Camberwell.

“At the other end of the spectrum, less than five per cent of homes were sold by auction in Narree Warren, Werribee, Rowville, Craigieburn and Mooroolbark," he added.

“It is also the case that clearance rates tend to be higher in the suburbs where auctions are more prevalent.”

So, is this auction result % really a surprise.

What is a real surprise is that the apparent auction capital of Australia, ie Melbourne, has only 22% of all sales sold via auction???

What gives then, when our local experts dominant in the local press say an auction is the way to go, and then suggests a $5 to $10k advertising press campaign is necessity.

In this world, nobody trusts anybody until their advice is proven. Your local area expert, rather than an auction“LOUDMOUTH , may be somebody to investigate in the first instance.