Auction is the worst method of selling your home.
It gives you a lower price and exposes you to tremendous risk. You are about to discover information about real estate auctions that most agents will never tell you. But first, an obvious warning: If you want advice about auctions, the last person to ask is an auction agent.
In his book, Swim with the Sharks Without Being Eaten Alive, author Harvey Mackay says there are three types of people in business: the sharks, the shark bait and those who are shark-proof. In the business of auctions, home-sellers are prime shark bait. But, when they understand the dangers and know the truths about auctions, they become shark-proof.
The Obvious Victims
Thousands of auction victims know the pain of expecting their homes to sell for a high price, only to be forced into accepting a low price at the auction. These people are the obvious victims and they all tell a similar story: The agent told me I’d get one price, but I got much less. As one lady described it, selling my home at auction was the worst experience of my life. She was told that an auction would easily give her more than $400,000. But, after weeks of pressure from the agent, she found herself selling for $320,000 which left her nearly $100,000 short of the figure she expected. This lady is one of tens of thousands of obvious auction victims. However, there are thousands of auction victims who are not so obvious.
The Hidden Victims
The hidden auction victims are those who sell their properties for more than the reserve price (the lowest price) but not for the highest price. These sellers think they received a good price, but don’t realise they did not get the highest price.
Your Number One Aim
The aim when selling your home is to get the highest price. At auctions, the agents know your lowest price that’s the reserve but they don’t know the buyers highest price (the BHP). If there are two buyers at the auction and they keep bidding, it seems really good because the price keeps going up. But when one buyer reaches his or her highest price, the bidding stops. And because no-one asks the highest bidder to pay more, your home sells for much less than it should have. It has not been sold for the buyers highest price. Auction buyers rarely pay their highest price. With auctions, the only people who always offer their highest price are the underbidders, those who miss out. Tragically, for thousands of home-sellers, most agents do not understand what is happening; and those who do understand, deliberately avoid mentioning it, preferring instead to focus on how much your home sold for above your lowest price the reserve.
The Undersell Example
Watch what happens and see how you, the seller, can be made to think you are winning, when you are actually losing thousands. Lets say your reserve price is $350,000. At the auction, there are two genuine bidders. Bidder A has a highest limit of $390,000. Bidder B has a highest limit of $360,000. These are the two BHP’s. Now, ask yourself: which BHP do you want the $360,000 or the $390,000? The answer is easy. You want the $390,000. But with an auction, you are not likely to get it. When the bidding reaches $350,000, your home is on the market. It is about to be sold. The bids will probably increase in amounts of $1,000. When the price reaches $360,000, Bidder B’s highest price has been reached. Bidder A then bids $361,000 and your home is sold. The price is $11,000 above the reserve, but your home sold for $29,000 less than Buyer A would have paid for it. And, like most hidden auction victims, you will never realise what has happened. You lose money because the focus of the agent is on your lowest price, instead of the buyer’s highest. Had the agent been a skilled negotiator, the buyer’s highest price would have been known before you sold. And you would have received an extra $29,000. As soon as an auction reaches your lowest price, it begins to slow down, almost as if it runs out of breath. Soon it collapses.
The only reason prices go up with auctions is because they start low. A basic rule of negotiation is always start high. It is much better to start above the price you want, rather than below the price you want. Auctions start low and that’s where they finish, low. No matter how high they climb, they almost always finish lower than if they had started high. One agent, who stopped using auctions, said: It was terrible to discover, after the auction, that a buyer was prepared to pay more money. In almost all auctions, the highest bidder would have paid more. The more the auction agent can keep the focus on a lower price, the more chance the agent has of selling it. And this is one of the main reasons agents like auctions they start low which makes it easier to make sales.
Appearance and Reality
Home-sellers lose thousands due to auction agents focusing on the sellers lowest prices instead of the buyers highest prices. Each time you see headlines saying homes have sold over reserve, always remember to ask: How much did they sell under the buyer’s highest price? Imagine a headline which said: Home sold for $29,000 less than the buyers wanted to pay! It is the same as saying Sold $11,000 above reserve.
A journalist with one of the major newspapers investigated the auction system. At the first auction she attended, a home sold for $231,000. The reserve was $225,000. The journalist thought what most people think: Auctions look pretty good for the seller. But then she asked the buyer what was the highest price he would have paid. He grinned and said, $240,000. The journalist realised home sellers were losing thousands at auctions without knowing it. This was a big story, one that could save consumers millions of dollars. The journalist wrote a large feature on the realities of auctions. The story was pulled. In her words, “The story was so watered down from the original (and a few things changed without them telling me) that any life left in it had been drained out.”
Real Estate Courses
The horrible reality of auctions can be seen in places consumers and journalists rarely visit the real estate training courses. In 1998, Kyle Watson was studying real estate at his local Technical College. He could barely believe what he was being taught. The teacher’s attitude was typical of the attitude of many agents, but it still shocked Kyle to hear such things in a Government approved course. On the subject of auctions the teacher said to the class, Sometimes it’s good to give the owner a kick in the guts. Another teacher, in Melbourne, openly recommends lying to home-sellers. To get prices down, this agent teaches a common trick. If you get an offer from a buyer before an auction, always tell the sellers that the offer is lower than it actually is, which helps to condition them to accept a lower price at the auction. His exact words to his students are: “If you get an offer before the auction of $270,000, convey to the owner a lower figure, say, $250,000.”
One of the main reasons agents like auctions is the increased money for advertising which home-sellers pay. (As you will see in Chapter Ten, advertising is an enormous waste of money.) The notes from the Melbourne course, include the following comment: The amount spent on advertising is much greater with an auction. This means extra publicity for your company. And this statement, which again is part of the written course notes: If the seller is moving interstate ask who is paying for the advertising. If it is being paid for by the company, bump up the overall advertising schedule. But if the sellers have no money, the agents will suggest borrowing on a credit card or arranging a loan from the bank until the home sells. The pressure of this extra debt increases the pressure to sell, which again suits the agents. Some agents agree to loan the advertising costs to the sellers, but if the sellers wish to change agents before the property is sold, and many do, the advertising money must be repaid in full. If the sellers do not have the money they are trapped with that agent. The notes in the training course are clear: With a large advertising budget, the client will be loyal to you for longer. If they owe $4,000, $5,000 or $6,000, taking the property away from you will mean they have to pay the advertising money owing immediately! Another course says: How to get money from people up front. It has a large heading: DOLLARS IN YOUR POCKET.And then, in bold type it asks: Is this Mercenary? followed by the unashamedly gleeful answer: Sure is. This course recommends placing a charge against the sellers homes to make sure they pay.
The reason sellers don’t pay is because they are angry and upset. And often broke. They were told that a high price will come from an auction and the more money spent on advertising, the higher would be the price. But when the final auction price is thousands below the agent’s quote, or when they get no buyers at the auction, they realise they have been duped. And then the agents sue them for money which was used to promote the agents. No wonder home-sellers get so angry.
Home-Sellers Tricked into Auction Advertising
This is a typical example of something that goes on constantly with auction advertising. It is taken from a letter written by one of Melbourne’s most well known auction firms. The agent wrote: “Your home is a very saleable property and should sell for $350,000 or more.” The sellers signed for auction. Five weeks later, the highest bid at the auction was $250,000, $100,000 below the agent quote. They refused to accept this price. And so the agent sued the sellers for $3,954.47 in advertising costs. The agent also placed a caveat on their home which prevented it from being sold until the advertising money was paid. This agent, whose first letter prior to signing up the sellers, said, “Our professional integrity will ensure the highest price for your home”, now wrote saying: “Your property was unsuccessfully auctioned and it is commercially appropriate that we lodge a caveat.” Few sellers have the money to employ a lawyer to fight these cases. A lady who worked with the Victorian Sheriff’s Office said that one of her most unpleasant jobs was to execute warrants against home-owners on behalf of agents for expenses relating to failed auctions. She described how home-owners were ‘furious and distraught’ with agents who had misled them over auctions. To avoid this ever happening to you, remember The Golden Rule, Never pay any money to any agent for any reason until your home is sold and you are happy that the agent has done the best for you. Most real estate courses focus on benefits for agents, not benefits for their clients.
A course held by the Real Estate Institute of New South Wales was called, “How to Condition Sellers.”Conditioning means persuading the seller to reduce the price of a property. It is accepted in real estate that, ‘Conditioning is easier with an auction.’ Before you sign up for an auction you will be quoted a high price. Once you sign, the conditioning process begins in earnest. And it continues right up until your home is sold. One agent’s wife, who listens to her husband on the phone, said that conditioning seems to work in three stages: first, it’s the good news, the advertisements are going in and there are lots of people inquiring. Second, it’s the ‘a little tougher’ news where the agent says the prices mentioned by the buyers are lower than expected. This ‘tougher’ news will continue for a few weeks. And then comes the third stage, which is the ‘lot tougher’ news. The auction is close now and the agent wants to lower the price. Many real estate networks use standard ‘conditioning letters' to deliver increasingly bad news as the day of the auction gets closer. Sellers who experience ‘conditioning’ hear some of the most misleading lines in real estate. The agents will say, “This is what the market is telling us. We have advertised your home, we have shown it to dozens of people and they all think it’s worth less than you expected.”
The Two Auction Traps
To sell plenty of homes, most auction agents set two traps for sellers. First, they persuade you that auctions get high prices. They talk about ‘the price going up’ and tell you about past ‘successes’ (while not mentioning most failures). Once they list your property, the second trap is sprung, getting you down in price by conditioning you. Some agents use another expression ‘managing the sellers’ expectations. It appears more professional. But conditioning is conditioning whatever it is called. Other expressions used are ‘crunch them’, ‘beat them around the head’, ‘make them sweat’ and ‘get it through’. To hear some agents in private conversation, a person could be mistaken for thinking they are describing torture. To many sellers, that is exactly what an auction is, mental and financial torture inflicted by agents who are only interested in making a sale at any price. Make no mistake: the sale, not the price, is the primary purpose of an auction. The appearance of real estate auctions is very different from the reality.
Two of the greatest motivating factors in human behaviour are fear of loss and desire of gain. Auction agents make liberal use of fear. The message is clear “If you don’t auction you could miss out on a really big price.” They fail to state that the same price, or better, can be obtained without auction. Here is an amazingly simple point which one agent made: The buyers buy because they want the homes. If there were no auctions, the same buyers would still buy the same homes. And, in most cases, they would pay more. This agent made another important point about low prices at auctions, “It is hard to get the highest price from buyers by taking them to a crowded room, or out the front of a property surrounded by strangers, and yelling at them!”
One of the most distasteful sights in real estate is the auction crunch. To see agents bully sellers to drop the price is to witness one of the most abhorrent of all sales stand over tactics. One home-owner who was considering selling at auction, attended an auction to see what happened. He described the scene: “Agents in black suits were circling the crowd. Suddenly, right in front of me, three men swarmed around an elderly couple. I realised this couple were the owners of the home which was being auctioned. The bidding had stopped at $341,000. The agents were urging the sellers to say ‘yes’. I heard the lady say, We want $380,000. That’s the lowest we’ll go.” One agent said, “You’ll never get another chance like this.” The lady said, “You told us we’d get $400,000” The agent said, “The market is not telling us that. This is what the buyers are saying. They are the ones who set the prices.” This elderly couple were very distressed. One agent’s face was just inches from the man’s face. I had an urge to drag him away. I couldn’t believe people could be virtually assaulted like this. The elderly man grabbed his wife’s arm and then waved his other arm as if he was giving up. Suddenly one of the agents leapt up and screamed, “It’s on the market!” A few seconds later the auctioneer yelled, “Sold!”. The elderly couple stood up and an agent led them away. The agent was smiling but the sellers looked so sad. It was horrible.”
The ‘Stimulate’ Trick
What this person witnessed was the final stages of the conditioning process, the ‘crunch’, together with one of the most unethical temptation tricks in real estate. It’s the trick of persuading sellers to lower the reserve and put the property ‘on the market’. The agents tempt the sellers by saying, “If you put it on the market, this will stimulate the bidding. The price will go up.” Sellers who fall for this trick discover, to their horror, that their home is usually sold immediately.
Home-sellers are often told that the reserve price protects them from selling too low. But there are two reserves. The first is the one you set when you decide to auction. The second is the one you set just before, or at, the auction, the one you have been ‘conditioned’ to accept. The second reserve is always below the price you thought you would get when you chose auction as your method of sale.
A statement which accurately describes most real estate auctions is: “deceit, trickery, sharp practice or breach of confidence by which it is sought to gain some unfair or dishonest advantage.” This is the Macquarie Dictionary’s definition of fraud.” Real estate auctions are riddled with fraud.”
The Quoting ‘Hooks’
Sellers are hooked into auctions with the promise of a high price and buyers are hooked with the promise of a low price. But how can the sellers get a high price and, at the same time, the buyers get a low price? It is not possible. The truth is somewhere in the middle. The sellers get less than they were told and the buyers pay more than they were told. And the agents get a commission, no matter what. These methods of ‘hooking’ people are known as ‘over quoting’ to the sellers and ‘under quoting’ to the buyers.
Imagine you want $300,000 for your home, but the agent believes it is worth less. If the agent tells you this, you might choose another agent. With auction, the agent can use such words as “might” and “maybe”. Most agents will use the ‘wonder sale’ trick. They will tell you about a home which sold at auction for tens of thousands of dollars extra. So, you sign up for auction. The agent now starts telling the buyers that your home “may” or “might” sell for “around” $250,000. Or the agent will quote a ‘price range’ by saying ‘$230,000 – $270,000’. The agent will reassure you that this is the strategy to attract buyers and you should not worry. This, on its own, should make you worry. If an agent will use a deceitful trick on buyers, the same will obviously be done to sellers. Some agents use the expression, “Bidding to start from”, followed by a price of $200,000. Again, to appease you, the agent will say this is to “attract buyers”. And yes, it does attract buyers, but mostly those who can only pay around $200,000. Come the day of the auction, you may have three or four buyers who expect to buy from $200,000. The agent will pressure you by saying, “This is what the market is telling you”. But your agent is looking in the wrong market. You are being forced down in price because the price hook attracts the wrong buyers. Oh sure, the price goes up with an auction and sure, some of these buyers will go up from $200,000. But when the ‘crunch’ comes at the auction, you’ll crack and sell for a lower price; most sellers do. You can see how you lose, but how do the buyers lose?
How Buyers Lose Too
In some cases there are several buyers at an auction, all of whom want to buy for what they were under quoted. They have paid between $500 and $1,000 each for professional advice and inspections. These buyers lose their money. Imagine the distress of buyers who are told they ‘may’ get your property for $200,000, and they have paid for advice and inspections and have their hearts set on your home, when they get to the auction and discover the reserve price is out of their range. When the buyers complain, the agents use this as ‘proof’ that auctions mean high prices. The truth is that the buyers have been duped with a low quote, just as the sellers were duped with a high quote.
A survey, conducted in Melbourne, revealed that eighty percent of home-sellers received a lower price at auction than quoted to them by the agent. In Brisbane, a poll of one major network’s auctions showed that 100 percent of sellers received a lower price than they were quoted. In both cities, most sellers said they would never use the same agent again. Real estate consumers can barely believe, in these times of supposed high consumer protection, that such deceptions still exist.
Dummy bidding is the auction system’s most notorious deception. Despite the denials of Institutes and their agents, most agents use dummy bidders to make fraudulent bids, (or the auctioneer will use ‘phantom’ bids by pointing towards walls or trees as if they are people). Ironically, some sellers give tacit approval to this deceit because they believe it pushes the price up. But dummy bidding deceives sellers as much as buyers, usually more so. The agents have a real challenge when there is only one genuine bidder. They need dummy bidders. Say your lowest (reserve) price is $250,000. The agent wants to get the genuine buyer as high as possible before ‘crunching’ you to reduce your reserve. If the bidding starts at $200,000, the next bid will be the dummy. Back to the genuine bidder, who then increases. And then another dummy bid. And so on, until the genuine bidder starts to weaken. The agent then approaches you with the ‘crunch’ to ‘put it on the market’. The agent says, “Look at all these people. This is what the ‘market’ is telling us.” You are pressured into making a major decision based on false information. Your home is sold thousands below the price you were ‘quoted’ by an agent who creates the impression that everything has been done to help you. But you have been deceived.
For the times when there are no genuine buyers, all the agent needs is a crowd. And then the dummy bidding again deceives sellers with a great ‘conditioning’ trick. Dummy bidders will stop at a price the agent has decided which is always well short of its value. The agent in a masterful example of ‘faking sincerity’ approaches the sellers and says, “I don’t think you should sell at this price. I am sure we will be able to do better later on.” The property is then ‘passed in’ at a figure well below what the sellers wanted. The shell shocked sellers have now been superbly conditioned, they have spent thousands on advertising (or even worse, they owe thousands), they have seen a large crowd (with no buyers) and they are ready to listen to ‘reason’. The most gullible sellers drop their price and their home sells quickly, for thousands below its real value.
Auctions require an exact date and time for the sale of your home. This is a huge mistake because the time may not suit the buyers. Auctions give you about 20 minutes to make a sale, whereas normal sales give you plenty of time, which means more options and a better chance of a higher price. The agents say that genuine buyers will always come to the auction. The facts do not support this. Newspapers often carry reports about something as simple as the weather keeping buyers away from auctions. “The heavy rain on the weekend has been blamed for the low attendance at recent auctions,” is a common statement. The buyers may have a family wedding or a holiday or an illness on the auction day. The agents don’t even realise they are losing some of the best buyers who don’t bother to enquire about the auction because of the date and the time. A dreadful example of how a set time can hurt sellers occurred when a buyer had a car accident on the way to the auction. By the time he arrived, the property had been sold for $540,000. The reserve price was $500,000. But the buyer who had the accident was prepared to pay $560,000. It defies belief that the success of an auction depends on what else is happening on the day of the auction. Aside from the weather, and the personal commitments of buyers, there are a string of interruptions almost every month, which cause buyers to avoid auctions. Melbourne’s Sunday Age (February 14 1999), made this comment: “The first interruptions to the auction market begin next month with the Grand Prix, followed by the Easter Holidays in April. In May there was the Mother’s Day weekend. In June there was the Queen’s birthday weekend. Things are always quiet in the winter months, plus there is the budget. And then in September it’s the football finals. And Father’s Day. And, in 1999, a State election. Plus several school holidays during the year. Try finding a weekend where there is not some reason for buyers to stay away from auctions. ”
When Auctions ‘Fail’
When a home fails to sell at auction, the agents stick a For Sale notice over the auction sign, which might as well read, ‘Failed’. Most failed auction properties sell for lower prices.
The ‘Clearance Rate’
Another deception with auctions is the ‘clearance rate’ claim. Agents will say that 90 percent of properties which go to auction are sold. When this figure is compared with normal sales, it looks very impressive and very tempting. But again, an obvious point is hidden, the properties which sell at auction would still have sold if they had not been auctioned. And they could have achieved a better result both in price and the happiness of the sellers. ‘Success’ to an agent, means a sale. It does not mean sellers are happy or they received the highest price. If agents measured the success of auctions by the satisfaction of sellers and buyers, the auction system could not exist. Buyers Do Not Like Auctions Agents claim that auctions attract more buyers, but this is not true.
Buyers do not like auctions.
A study, conducted by the Swinburne University of Technology in Melbourne, revealed that only four percent of home buyers nominated auction as their preferred method of buying a home. Said one buyer: “I am disgusted and outraged at the auction system. The agents that use the auction system must cost sellers thousands of dollars. Buyers hate auctions and I am not an isolated case.” Agents often have buyers who say, “Don’t bother showing us anything for auction because we are not interested.” They never have buyers refusing to see homes that are not for auction. If you choose auction, you are choosing a method of sale which is disliked by almost all home-buyers. It cannot be stressed too often, auctions make it easier for agents to make sales because with auctions, home-sellers are more easily pressured to reduce prices.
Be careful of the statement: “This area is ideal for auctions.” Just because a lot of people make a mistake does not remove the mistake. Or the danger. There is even more reason to avoid auctions if your area is rife with auctions. Genuine buyers will be attracted to your home because it is not for auction. Agents who do not use auctions sell more homes for more money and have happier clients, especially in ‘auction areas’.
Selling Before Auction
Sellers are often discouraged from selling before the auction even if there is a good offer for the home. The agent will say, “You might get more on the auction day.” Many sellers are offered a price before an auction and many agents encourage them to refuse it. But then the home sells for a lower price at the auction, often to the same buyer! There are two reasons many agents discourage selling before the auction. The first is that they have not used up all your advertising money. If you have committed to spend $10,000 over six weeks and you receive a good offer after three weeks, the agent will miss out on another three weeks of ‘profile’ advertising. The second reason agents discourage selling before auction, and this applies to auctions which are held ‘in-rooms’ is that it is important, to them, that there are many sales on the day of the auction. Agents try to make sure that the first and the last properties being auctioned are sure sellers. The first sale sets the mood of the entire auction. The agents encourage the crowd to clap; everything is off to a great start. To keep the crowd, the agents make sure that the last property being auctioned is the one with the most interest. When this home sells for more than reserve and there are lots of bidders and a big crowd, the final impression created is that auctions are a big success: big crowds, lots of bidders and high prices. As one auctioneer teaches, “Auctions are a circus and we have to put on a good show.” But there are many dangerous tricks performed at auctions.
Each week, hundreds of home sellers all over Australia lose thousands of dollars with auctions. It is a national disgrace, particularly when it happens to people who can least afford it: the poor, the elderly or the sick. Real Estate Institutes, franchise networks and high profile auction agents all know what goes on and most do nothing to stop it.
A Typical Case
John and Betty had lived in the Sydney suburb of Dundas for forty years. John was an invalid pensioner with a chronic heart condition. He also suffered from high blood pressure and was in remission from cancer. In 1999, John and Betty decided to sell their home and move to a retirement village. They did what most home-sellers do: they called a local agent. The agent suggested auction because “auctions go up in price” and they could look forward to “easily receiving $280,000”. However, they would need to pay at least one percent of the expected selling price ,$2,800, for advertising expenses. John and Betty did not have $2,800, but when the agent agreed to deduct the advertising costs from the sale, they signed the auction contract. Fast forward to the day of the auction. John and Betty are nervous because there has been a barrage of bad news. The buyers don’t seem to like their home. The offers have been well below what the agent told them to expect. They have heard no mention of the $280,000 they were quoted. The agent constantly says they must be ‘realistic’. At the auction, the bidding began at $220,000. It went up to $252,000, and stopped. The agent urged John and Betty to reduce the reserve. They refused. This was not what they were promised. The agent said, “Reduce the reserve and the bidding will be stimulated. You could still get your $280,000. It’s the only hope you’ve got. Quick, say yes, while the buyer is still here!” Under extreme pressure in front of a large crowd, John caved in. Betty was horrified; it was her home too, but the agent ignored her. In what she later described as “mere seconds”, the buyer offered $500 more. And the auctioneer yelled, “Sold!”. They were distraught. Their home had been sold for $252,500, almost $30,000 less than the agent had promised they could “easily get”. The buyer was unable to pay the deposit on the spot and the agent asked John and Betty for more time. John refused. He became angry and ordered the agent from his property. And then came the legal demands from the auction agent who wanted his commission plus the advertising money, an amount of almost $10,000. A hefty price for deceiving an invalid pensioner. John and Betty’s case is a typical example of what happens to thousands of home-sellers when they choose auction. What could they have done to prevent such a dreadful experience? The auction agent is a member of a large real estate network. He is also a member of the Real Estate Institute. He is licensed by the State Government. But this was not enough to protect John and Betty. And it is not enough to protect you.
The Real Estate Institute “Guarantee”
The Real Estate Institute in New South Wales advertises: “Deal only with a member of the Institute. Our ethics and rules of practice guarantee your protection.” A legal opinion on the Institute ‘guarantee’ stated: “In my view their advertisement is misleading. This is not a guarantee in any sense of the word. The Institute cannot even enforce conclusively its own orders. If a member does not comply, all the Institute can do is expel the member. This offers no protection at all to the public. The code itself is therefore of little help to an aggrieved member of the public and falls far short of any definition of a guarantee.” Real Estate Institutes are made up of real estate agents. John and Betty did not understand this point. They did not have the knowledge to protect themselves from unethical agents, many of whom are members of Institutes.
Knowledge and Advice
The knowledge you need to protect yourself from auction agents is simple: DO NOT AUCTION. However, if the agent is tempting you and you feel incapable of resisting an auction, then follow this advice: 1) Insist that all verbal statements be confirmed in writing, including a commitment from the agent that you will not be liable for any costs for any reason until the agent delivers on all promises made to you. 2) Pay no money and sign no documents until you have received independent advice, preferably from a lawyer. One lawyer commented, “I have never had a client who has had a successful auction.” Ask the lawyer to read the relevant points from this book, some may not realise just how bad the situation can be. 3) Insist on an agent who offers you a real guarantee which states that if you are not happy there are no charges. Many agents will tell you this is ‘impossible’, that there are no guarantees in life about anything. Do not hire these agents.
Let the Agent Take the Risk
Real estate consumers have little protection from the deceit of auctions. The real estate industry is perhaps the only industry where you can pay huge sums of money for a service and receive nothing. Or you can receive worse than nothing; you can lose thousands. The closest industry to real estate auctions is gambling. And that’s what real estate auctions are, a gamble with a huge risk of losing thousands. If an agent wants you to auction, insist that the agent takes the risk, not you. Most will refuse to accept this risk, which is understandable because agents are well aware of the dangers of auctions. They don’t mind you taking the risk, but they won’t take the risk themselves. The auction system is designed to sell homes with almost no regard for the welfare of home-sellers. And that’s exactly what it does. As one agent in the Sydney suburb of Balmain says to home-sellers, “We won’t do auctions to you.” Of all the methods of selling your home, auction is by far the worst. Don’t let agents ‘do’ auctions to you, under any circumstances.
AVOIDING MISTAKES The important points of… AUCTIONS
1. Auction is the worst method of selling any home. 2. The reserve price is your lowest price. 3. Auctions start low. That’s the only reason they go up. 4. When you hear of auctions selling above reserve, always wonder how much they sold under the Buyers Highest Price. 5. Auctions are used to condition and then crunch sellers. 6. Agents over-quote to sellers and under-quote to buyers. 7. Under-quoting attracts buyers who cannot afford your home. 8. Sellers are made to pay for advertising. 9. Dummy bidding is used to deceive buyers and sellers. 10. A set date and time is inconvenient for some buyers. 11. 96 percent of buyers do not like auctions. 12. Insist that the agent takes all the risk. 13. DO NOT AUCTION.
This is an extract from the book Real Estate Mistakes by Neil Jenman.