Why Public Auctions get lower prices!

Public Auction is the most deceptive method used to sell property in Australia.  Home sellers tempted to go to Public Auction their homes should remember four words:



For the Agent, public auctions are all about gaining advertising revenue and personal profile.    The “sale” is more important that the “price”.      We were taught this at Franchise School!

STARTING IN A POSITION OF WEAKNESS – It seems that the price goes up at Auction – its only because it starts LOW.   Your sale should start from a position of strength, not of weakness.

RESERVE PRICE -The Reserve Price  is the price at which the home can be sold.  Its the lowest price a seller is prepared to accept AND THAT BECOMES THE CENTRAL FOCUS OF THE AUCTION!     You cannot possibly get the highest price for your home if the central focus on the Seller’s lowest Price.

SELLER AT A HUGE DISADVANTAGE -As a seller you are at a huge disadvantage because your lowest price, the “reserve” is always disclosed BEFORE the home is sold.   That’s when you hear the agent yell “the home is ON the market”.

REPELS BUYERS – Research shows that more than 90% of buyers do not like auctions.      It then makes no sense to use a system of selling disliked by most of the buyers.    You can ONLY get the highest price of all of the buyers who may be interested in a home are given the chance to buy the home.     As auctions repel so many buyers, the highest paying buyers often avoid auctions.

INCONVENIENT – If the auction date does not suit many buyers they will not even bother to enquire!   The buyers that are lost in this manner may have paid more for the property.

BARGAIN HUNTERS – Investors, property dealers and bargain hunters all know that auctions are one of the best places to find cheap deals in real estate.   It is well known that deceased estates and mortgagee sales are often sold for a “song” at auction.  these same Investors, property dealers and bargain hunters almost NEVER sell at auction.    That’s because auctions get lower prices.     Auction agents try to justify this by saying “Look at the banks and the Government departments.  They use auctions”.   That’s because the “sale” is far more important that the “price”.

COMPARATIVE – NOT COMPETITIVE –  If two or more parties want to buy the same home, the WORST THING you can do, from a negotiation point, is to allow each person to SEE what the other is offering!    Instead of offering their highest price, each buyer will only offer  SMALL amount above the other.       Auctions are touted as being competitive – but the competition is in the PUBLIC not private – which makes is COMPARATIVE more than competitive.    Everyone Compares what everyone else is offering.      The buyers have a tremendous advantage over the seller.

DECEPTION – To persuade sellers to auction their homes, agents will talk about high prices.    To persuade buyers to come to the auction, the same agents will talk about low prices.       Most times both seller and buyer are deceived.    Sellers end up selling for less than they were told they could get and the buyers end up paying more than they were told they could pay.        The most infamous deceipt is VENDOR BIDDING where agents use bogus bids to keep the auction moving.  Some agents deny that Vendor Bidding exists but consider this – How do you have an auction with only ONE bidder?       Most people believe that vendor bidding increases the price, but vendor bidding deceives the sellers as much as buyers.  It is used to get the price up to the point where it can be sold – the reserve price – the LOWEST price a seller will accept!     Often times once the home reaches its reserve, the agent stops using bogus bids.

SELLS TO THE WRONG MARKET – To attract buyers, agents will market the home by advertising it to “start from” a low price.   It does indeed attract buyers but it attracts buyers who want to buy at the low price and NOT at the price the seller wants.    Most of these buyers can’t afford to pay much more than the price advertised an so on the day of auctions there may be a crowd all wanting to buy AT A LOW PRICE.      The agent will then say to the sellers “this is what the market is telling us.”      But the agent has been looking in the WRONG market – a market BELOW THE VALUE of the home.

FAILED AUCTIONS – When a home does not sell at auction – it is labelled a “failure”.  Buyers think something is wrong with it and many will offer lower prices.



Adapted from Article by Neil Jenman 24 Nov 2017

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Why Public Auctions get lower prices!