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12 January 2010

Price Baiting before auctions - How are they getting around this?

When a property is advertised for auction, real estate agents aren't supposed to give any indication of the price the owners are likely to accept. Advertising with a suggested price bracket or lower limit is referred to as 'price baiting' and this practice is not allowed. For futher reading on this, take a look at the guidelines for auctions published by the REIA.

Now we've establishd what should happen, but how is 'price baiting' still occurring?

Okay, there are the blatently obvious ways. For example, if you work your way through auction listings on the web, it won't take long before you come across an auction listing with a price next to it. I just did a quick search of Brisbane auctions and the 5th listing had a price of $389,000. The other blatently obvious method is where a buyer asks the agent.

However, there are also more subtle ways.

As you know, a property may be sold by private treaty (standard contract negotiations) or by auction. When an agent starts a marketing campaign, their client may advertise it for sale by private treaty and nominate a price (your typical ad, "House for Sale - $850,000". After a week, the vendor can opt to go to auction instead. As soon as this happens, breadcrumbs are left behind to offer the same effect as price baiting. Mission accomplished!

As always, buyer's beware!

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