Auctions - "Vendor Bidding" - REIA Guidelines

In a nutshell, "Vendor Bidding" is where the party selling the property bids during an auction. The idea is that they're to push the price up to the reserve price where it can be sold.

There are a couple of rules associated with this practice, such as the need for all bids to be clear and transparent (announced prior to auction commencing and before each vendor bid) and no bids once the bidding reaches the reserve price. Have a quick read of the guidelines from the REIA, which explains in more detail.

Why is it that buyers sometimes bolt in a one-horse race? Why would you bid at an auction when you are effectively the only bidder? Mostly, I put it down to confusion on the part of the buyer.

Where does the confusion come from?

The auctioneer is required to make the vendor's bid clear and unambiguous, HOWEVER, 'clear and unambiguous' is relative to the buyer's experience at auctions. Despite an auctioneer declaring that it's a vendor's bid, an inexperienced buyer can be quite confused and may not distinguish these bids from genuine bids.

When you're bidding at an auction, there is plenty of excitement, adrenaline and Real Estate Agents whispering in your ear, "I bet you only need one more strong bid and you'll buy it", etc. With all this noise and distraction, the words "The vendor is exercising their right to place the next bid at $855,000" probably gets translated into ".... ..... .... .... bid at $855,000", particularly when the auctioneer points to the other side of the crowd to give the illusion there's another potential buyer in the crowd.

My advice:
- Stay alert to the practice of vendor bidding.
- Know the legislation as it applies to your state or territory (there are some minor differences)
- Don't win the one-horse race. If you're the last bidder and the only other person bidding is the vendor, STOP BIDDING!!!

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