A tale of two auctions

[kezia]

Today on my street I observed an auction. Three months ago I watched an auction for the house next door.

They’re both townhouses on roughly 350m2. One a 3x2 and one a 4x2. I’d view the 4x2 as in a more desirable position on the street even if they were the same size.

Three months ago for the 3x2. there were roughly ten bidders and about 7-8 neighbours. The bidding was solid between 3-4 bidders at the pointy end. The house sold for 1.16m.

The REA who also lives on our street went door knocking trying to drum up business and also listed the second house.

Today the same neighbours were out. But with three bidding families. The opening bid was at the lower end of the range. The second and third bids were vendor bids. 4th being 1.02m. The auction was called passed in. REA went in and reopened at 1.05 which was accepted.

This is an unadjusted decline of 9% in three months. More considering the desirability of the second property.

Purely anecdotal. The REAs looked pretty dejected. Personally I was reminded of how punchable auctioneers are.

For context I’m in the Melbourne Eastern suburbs.

Edited: for pedants with low mental acuity.

 

[resjudicata]

@kezia Vendor can bid on their own auction is so lame. Should not be allowed.

 

[hippiemummy]

@resjudicata In VIC vendor bids have to be called out as such, and can't be higher than the reserve...purely theatrical exercise to build some hype

 

[kezia]

@resjudicata I’m kinda worth you. At the end of the day they don’t have to sell until it hits the reserve. So as long as it’s clear that it’s a vendor bid I guess it’s just part of it.

 

[aci57]

@kezia As a perthy where auctions are rare, if it won’t sell until it hits reserve… why not start the auction at that price?

 

[belljp]

@aci57 I assume psychological pressure.

If you take a bid of 1.2 million and have a reserve of 1.5 million. You ideally get 4 or 5 people bidding it up. So those 4 or 5 people feel validation that lots of people want this, it surely must be worth it. Then the final two get to flex who has the most money in the final battle. Ideally emotions take them over and they keep bidding higher and higher.

Or the alternative is you start at 1.5 and get no bids and everyone is left thinking… is this piece of junk worth this much?

 

[ronal2dduff]

@belljp Or the vendor has to lower their reserve to a number that will generate more interest?
Can’t market forces solve this problem?

 

[quenton]

@ronal2dduff "Market forces" isn't some formula, it is very much psychological.

 

[picnic_00]

@aci57 Because the whole goddamned thing is a dishonest farce designed for the vendors. It allows the REA to quote a range well under the vendor's KNOWN reserve to suck buyers in. When it sells towards the top of the range the REA says, the market is strong, puffs his chest out. When no bids meet the already KNOWN reserve and it therefore passes in - there are almost never any consequences for underquoting. But you want to get buyers in and whip the poor bastards into a frenzy of overpaying and overleveraging themselves such that they'll be screwed when interest rates go up. Huzzah.
Cut scene: state government rubs its greedy, dishonest hands together and works out what pointless project they will waste their ill-gotten gains on.

 

[ram253]

@picnic_00 My God you're so cynical, you may as well be my spirit animal.

 

[ash8676]

@aci57 To create competition

 

[serreal]

@aci57 Because auctions are dumb

 

[simply4him]

@kezia I don't understand why auctions don't just start at the reserve.

Getting bids up to the reserve seems like a waste of time.

 

[hearforonequestion]

@simply4him See above comments

 

[simply4him]

@hearforonequestion Seems like real estate agent BS to me.

 

[jameskupar]

@simply4him Because we haven't made it illegal