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08 January 2010

Vendor Bidding = Last Offer? I don't think so!!

Have you ever talked to a real estate agent about a property that has been passed in at auction? Whenever this happens, I always ask what it was passed in for (the highest bid). Sounds like a reasonable question, doesn't it?

Problem? Not all bids in the bidding process are genuine bids. We'll skip 'dummy bidding', as that's an article on its own. In this instance, I'm referring to 'vendor bids', or bids made on behalf of the person selling the property. These are usually made by the auctioneer on behalf of the vendor so they can bump the price up to its reserve price.

Anyway, I was representing a client a couple of months ago for a property in North Lakes. As my client couldn't enter into a cash offer, I couldn't bid on his behalf. That didn't bother me, as there was no competition on the day. Either the marketing wasn't fantastic, or there were no cash buyers, as no-one placed an opening bid on the property.

Instead of walking away from the auction with no activity, the auctioneer made a couple of snappy vendor bids. I estimated the property's value to be around $510,000 - 530,000. Sure enough, the last vendor's bid went to $510,000, then it was passed in without a peep from any buyers. I spoke to the real estate agent the next day and asked him how the auction went. He told me that there was plenty of bidding activity and it was passed in for $510,000.

- What would you make of that tale if you weren't there at the auction?

- How would that statement influence you as a buyer?

Fortunately, we knew what really happened. We were able to advise our client about the lack of activity on the day (or 'what the market thought of the property') and how we could take advantage of this. In the end, we achieved a great result for our client.

Remember, Morpheus Property can help represent you at auctions for a small fee ($880 if successful, $440 if passed in). We don't always recommend bidding (as in the above example) and we happy to help with post-auction negotiations. Give us a call on 1300 911 576 if you're considering buying at auction and we'll make sure you don't get sucked into the shenanigans.

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