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VENDOR BIDS? DID YOU KNOW?

Well last week was a quiet week with only 2 properties up for auction. 1 sold prior and 1 was cancelled on the day.

AUCTION KNOWLEDGE

Did you know that the auctioneer may make 1 vendor bid (and only 1) vendor bid at an auction for the sale of residential property on behalf of the seller. The auctioneer has to reserve the right to do this before the auction commences. When the auctioneer makes the vendor bid he/she must declare this.

In addition did you know that if a property passes in and the last bid was a vendor bid then ANY information the agent gives in writing or verbally to any person about the result of the auction will need to also note that the property was passed in with a “vendor bid”. This includes information provided to the newspapers covering the auction results!

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ETHICAL AGENTS LEFT DISAPPOINTED AGAIN

The heading read “ Real estate agents busted for low quotes” on news.com.au this week and our first reaction here at Beach & Bay was “finally they catch those dodgy agents that ruin the reputation of the industry”.

Amongst ethical agents it is a source of never ending frustration that some agents continue to list auction properties that on the agency agreement with the seller are at a much higher figure than what those agents quote to buyers.

In 2003, the State Government introduced the Property, Stock and Business Agents Act, banning underquoting but we as agents have not seen much change, the same offenders continue to do the wrong thing. In principle it was good to hear that the Office of Fair Trading was inspecting and fining agents for this breach.

On closer inspection of the reports in the news, we were slightly alarmed. From what I read it seems that real estate agents need to throw caution to the wind and forget about being conservative in giving an owner a price for what their property is worth, in this very uncertain market or maybe we need to study palm reading.

The news.com.au article mentions the McGrath agency at Lindfield’s case where they have been fined for the following:

They quoted on the agency agreement $820,000 to $920,000. This means the owner agreed with the agent that their property was worth somewhere between these 2 figures. Then the article says “But Fair Trading investigators found buyers were told of a likely selling price of over $820,000”. Now surely the cisn’t getting narky over the wording of this? Should they have quoted to buyers “$820,000 and over”, rather than “above $820,000”?

The property later sold at auction for $1.1 million. Now this doesn’t seem to have been an issue, at least not the way the article was written. And really this can not be a problem because it is an auction and people are supposed to get carried away, auction properties are properties that are unique, that can’t be compared, are scarce and are auctioned because they are difficult to price. I am hoping the problem does not lie in this final price because from now on if the price goes way above our agency agreement we might have to stop the auction and tell people they are getting carried away and they must stop?

If I was John McGrath I would be fighting this case too, if these are all the facts. The main point with this example is that the owner/vendor/seller has agreed with the agent as to what they think their property is worth. If the buyer thinks it is worth more, that is the buyer’s problem.

Real estate agents in NSW are the most regulated industry you can find and yes I agree that there are agents doing the wrong thing all over town. But the above case is just going to make us as agents scared to open our mouths with any quoting. Maybe for auction properties we should just tell buyers to go and do their own research.

And one other point I would like to make is we are working for the seller, they are the ones who pay us. Mind you we wouldn’t make any money if we didn’t have any buyers.

In USA they have buyer’s agents and seller’s agents and both get paid. Maybe this is something we need to think more about because as a real estate agent in NSW we have a very conflicted job.

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IF AN AUCTION GO TO AUCTION

Several auctions have been cancelled or withdrawn lately on the day of the auction and signs posted on the signboard saying “Under Contract” or “Under Offer”.

A real estate agent interprets this as “There are no buyers”. This might seem cynical but there are several reasons for this. Practically it should not be possible to be “under contract” or “under offer” on the day of the auction or during the course of an auction campaign. One of the reasons sellers choose to market their property for auction is so the pressure is put on the buyer. If you buy at auction or negotiate and buy after auction (until midnight on the day of the auction) you must exchange contracts and put an unconditional deposit on that property, normally 10%. The buyer loses that if they pull out after exchange for any reason. The big difference with “Under Contract” is that the buyer exchanges contracts on a small deposit (0.25%) and has 5 working days to pull out for any reason (otherwise known as exchanging under cool off). The seller can not pull out, only the buyer. Why would a seller accept worse conditions the day before an auction, or on the day of the auction, it just does not make sense.

Even worse is “Under Offer” which means the buyer has made a verbal offer, no contracts signed and can pull out at anytime with absolutely no financial penalty. Better to hold the auction than cancel under those conditions. If you have committed to an auction make sure you go to auction.

Recently there was an “auction cancelled – under offer” sign on a property on auction day, then the ad in the Leader appeared the following Tuesday with the same property advertised “For Sale”. This is interesting as the Leader advertising deadlines mean that they must have known on Thursday prior to the auction that the offer in place on auction day was no longer an “offer”, 2 days ahead of the Saturday auction!!! I am confused are you?

Even during an auction campaign it is not smart to exchange a property under contract with 5 day cool off. In these uncertain times, imagine the situation where a seller accepts an offer of say $800,000, contracts are exchanged under a “5 day cool off” with a $2000 deposit. For 5 working days the seller waits to see if the buyer goes ahead, in the meantime, no one else can buy the property. 5 working days is a long time in a month marketing campaign. Worse case happens and the buyer pulls out. Even mid way through the marketing campaign, all momentum is lost. All the other interest has gone elsewhere as they thought the property was sold. Even worse the buyer could have pulled out for any reason ie decided to go on a holiday or buy a car instead but other buyers start to think the worst, maybe the pest and building was bad…

My advice to the public is, if your agent tells you in the course of marketing your property for auction that you should accept “under contract” or “under offer” conditions, ask the agent why you are paying extra to do an auction campaign and ask him to go back to real estate school!

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