Why We Don’t Believe In Public Auctions

This morning Neil Jenman released an article called…

HOW AUCTIONS KILL THE HIGHEST PRICE
And how buyers save tens of thousands of dollars!

In it he claims a typical real estate auction almost GUARANTEES you kill your chances of getting the absolute highest price for your property.how auctions kill the highEST price

The very nature of the public auction system prevents buyers from paying the highest price they are often quite willing to pay – Neil Jenman

In the article he talks about a lady named Ning. Born and raised in Indonesia of Chinese descent she migrated to our great country and like so many others before her first goal was to buy herself a slice of the great Australian dream. So she set off and started looking for a home.

She found a small apartment in Kengsington in Sydney’s Eastern Suburbs. It was small and in an old building but it was all that she needed.

There was one problem however there was no price on the advertisement. The property was going to auction.

Ning did not understand how the auction system works so she called the agent to find out.

The agent said “It’s easy, just come to the auction and start building and then if you are the highest bidder the property will be sold to you.”

When Ning asked about how to pay the deposit and agent told her she would have to pay a ten percent deposit and sign a contract for the amount you bid.

Ming told the agent she did not have a cheque-book so she could not bring a cheque.

“No problem” replied the agent. “Just go to the bank and get a bank cheque for 10% of the amount you want to pay the property”

Ning told the agent her highest price was $750,000.  Then the agent told her to “go and get a bank cheque for $75,000 and bring it along to the auction”.

So, that’s what she did. She got a bank cheque made out to the real estate agent’s trust account for $75,000.

On the day of the auction Ning was nervous. She had a brief chat with the agent as she registered to bid.

Then the bidding started…

“$650,000”

Then someone yelled out “$660,000”

The bidding went up by $10,000 lots until it reached $680,000. That’s when the auctioneer yelled “It’s on the market!”

The bidding slowed down to $5000 amounts. When it  reached $700,000 it stopped. Silence.

The auction stalled and after a few more $1000 bids the property was sold to Ning for $703,000.

After the auction Ning noticed the sellers were very happy with the result. Why wouldn’t they be happy? Just sold the property for well over the reserve price they set.

Ning said she felt sorry for the owners because they did not realise she was willing to pay $750,000.

And worst of all: the agent knew Ning was prepared to pay far more than she did. $47,000 is how much the owners lost because they decided to hire an agent who recommended auction as the best method for selling their property.

Click here to read the whole article