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Thread: auctions?

  1. #1
    Join Date
    May 2005
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    Hamilton NZ
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    Default auctions?

    Has anyone brought a property here in New Zealand at auction?

    Do you feel you got a good deal? Or do you feel they push the price up?

    Why do so many properties go to auction rather than being sold on the open market? It just a sales ruse?

  2. #2
    Join Date
    Apr 2005
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    Sumner, Christchurch NZ
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    I think that part of the reason for having so many auctions has been that in a steeply rising market it has been viewed as a way of the marketplace setting the correct value - at the end of the day a house is worth what someone is prepared to pay for it at a given time and an auction is one way of establishing this.

    In NZ most houses are individual - you don't get estates of 200 house which are split amongst 4 house types. This means trying to establish or compare prices based on similar properties in the locality is less reliable than in the UK. Many people in the UK live in a house of identical design to lots of their neighbours. Whilst specific location, state of (dis)repair, improvements, garden etc etc will mean some price differential, recent sales of other properties of the same type will give a good idea of the current ballpark. When all houses are individuals this isn't so easy.

  3. #3
    Join Date
    Jul 2005
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    According to the book "Dont Sign Anything" (Kind of a crash course in just how evil estate agents can be) - Auctions will hardly ever get the highest price available for a house (or any other item come to that).

    It works like this.

    House for sale. Buyers told by agenst - we can get $500k-$600k easily for this - auction it - you always get the highest prices because bidders push the price up.

    Sellers sign, and pay huge advertising fees for the auction (on top of the commision).

    3-4 open homes. Loads of people come to look (its a weekend hobby for many people). The agents say "Hey -look how many people we have looking at your house -look how hard we are working for you".

    However - the agents tell the viewers "You could get this house for $400k! Come to the auction" They tell the sellers "We think you need to be realisitic - the market is telling us the house is worth $490k"

    Auction day arrives. Loads of people turn up. Of which possibly 1 or 2 can actually buy the property - but may be expecting it to sell for $400k.

    Heres the crunch. The reserve is set, say at $500k. Bidding starts - as soon as it hits 500k it is "on the market". If you are lucky and it gets past this - the price is determined NOT by who can pay the most - but BY WHO BACKS OUT FIRST.

    Buyer 1 could go up as far as $510. Buyer 2 COULD pay $600. Buyer 2 only has to get to $515 to be the proud owner of a new house. They paid $85k LESS than they would have done - so the seller loses that $85k (plus the huge commisiuon and advertising costs.

    Even worse - if the bidding doesnt reach the reserve - then it either gets passed in and can be negotiated (but you still have a buyer who was not expecting to have to pay anywhere near what the vendors were expecting to recieve), or the agents ask the vendor to "Put the house on the market". This term means - the next bid gets it. Essentially the reserve is ignored.

    I persoannly would never want to either buy or sell a house at auction. I wouldnt even look at houses that did not have a price on it. The auction process is stressful and in IMHO, cruel. I went to a couple - and I was sickened by the behaviour of the agents - from bullying, lying and the utterly disgusting practice of "Vendor Bidding" - where the auctioneer literally "invents" bids to push the price up.

    1 property we saw we were told would fetch $600k. I have no idea what the vendors were told. The bidding STARTED at 600k. ONLY 1 MAN WAS BIDDING - agains the vendor - he ended up paying 760k : (And remember - he was the ONLY one at the auction able to buy the property!)

    OK, so thats really scary stuff - but I really think it helps to be armed before you get to the agents. It really has helped us in our House Buying process. Every trick the agent has used - we have been ready for. We know what they are trying to do and have been able to see past it, and avaoid many pitfalls.

    I hope this helps you - and doesnt scare you off entirely ops:

    Avalon

  4. #4
    Join Date
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    Sumner, Christchurch NZ
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    In the final analysis a house is worth what someone is prepared to pay for it regardless of the method used.

    Our house was put on the market at a fixed price - the vendor didn't want the stress of an auction - and I was the first to see it (before the details even got printed). I decided to buy it and IMO got one of the biggest bargains ever. I'm sure that if it had gone to auction there would have been lots of interest and the price would have been significantly higher.

    But that's just conjecture - all I can say is that I was very happy with the property at the price I paid.

    I agree that there have been some shocking revelations in NZ about the tactics of agents at auctions, but I don't think that this necessarily means that anyone should rule out using this method to buy or sell property, especially if the place in question is particularly 'individual'.

  5. #5
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    Quote Originally Posted by GeorgeM
    In the final analysis a house is worth what someone is prepared to pay for it regardless of the method used.

    .
    But its not at auction - its worth what the last person to drop out of bidding thinks it worth.

    Apparently - many people would have paid much more for thier homes - but they just didnt have too.

    I would aggree however - that auction is probably worth considering for a truly "unique" property.

    Also - its worth noting that at an auction - you know you the buyers lowest acceptable price (the reserve), but the buyer never knows your highest price (what you cam pay up to).

    Bizarre as it may seem, the way to get the best price for a home is to sell the way we generally do in the uk :eek

    Avalon xxx

  6. #6
    Join Date
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    Sumner, Christchurch NZ
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    Quote Originally Posted by Avalon
    But its not at auction - its worth what the last person to drop out of bidding thinks it worth.
    I'd never looked at it from this angle before, but I guess you have a point.

    But the same can be said about fixing a price - the only way that I'd be confident that I'd met the market would be if my house hung around for a while, I lowered the price, it hung around again, I lowered it again and then I had a rush of buyers!

    Whenever we've sold houses they've moved reasonably quickly (which is good) but we've also been left with the disconcerting thought that we'd underpriced them (which isn't so hot). Pretending that we're expert at hitting the right price straight off helps me sleep at night .

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