Trying to buy a property at auction can be a frustrating experience. It is usual to ask the estate agent handling the sale for an estimate of what price it will bring, but there is no guarantee that the final bidding figure will be anywhere near that estimate. Some estate agents deliberately " under quote " to inflate interest in the property to attract a bigger crowd of bidders.
Why do they do that ? A big crowd waiting for the hammer to fall impresses the seller that the agent has done a great job in promoting the sale - and a big show of interest convinces prospective buyers that this is a sought after property and may convince some to bid higher than their intended limit.
For the unsuccessful buyer this comes at a cost. The wise will have pre-arranged a mortgage consistent with their expected purchase price and this may have involved pre-sale property checks because a successful bidder is required to lodge a ten percent deposit at the conclusion of the sale. Should later problems occur, that deposit is forfeited unless the sale reaches final conclusion.
One aspect of auctions that draws angst is the hidden " reserve " price. This is the figure the seller demands must be reached - or the property is " withdrawn from sale " and private negotiations usually then take place with the highest bidder. There is pressure building to have that reserve price listed on sale advertising at least a week prior to the auction. There is no reason it should be a secret withheld from bidders !
The benefits are obvious. If a prospective buyer attends the auction they are prepared to buy at this nominated price level. Should the bidding fall short, then the property is available to the first person to offer the reserve price and conclude the purchase. It ensures that a realistic price is openly displayed and that the property will not be withdrawn if the seller has set a secret ridiculously high price as the hidden reserve.
Unfortunately, it does nothing to stop bidding reaching unexpected heights and that is a hazard of a rising property market. But it does stop sellers setting a ridiculously low reserve price to attract interest because auctions are an unpredictable outcome - and that reserve price is the price the property must be sold for if no higher bid is received.
Setting this into legislation will be the next hurdle but it would be a useful step in ironing out the vagaries that are confronting the vexing real estate jungle. A little clarity would be welcomed - by both buyers and sellers !
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