Although auctions are a common feature in the residential landscape in Australia, every auction is different. Because every property has its own signature, each therefore will have its own level of interest. Consequently, some properties may have one bidder, two bidders, or even a dozen and of course many have no bidders at all. The result therefore falls upon the atmosphere and the pace of the auction and each will differ greatly. The next conundrum falls on the vendor and each vendor’s desire to sell varies for a multitude of reasons. Will they put their property on the market at a reasonable level and let the market dictate the price? Or will they try to create the market for their own interest, with vendor and dummy bids pushing the price up to a level at which they would sell, which is not necessarily the market price? The Australian Consumer and Competition Commission views this as a breach of section 12 of the Trade Practices Acts, but dummy bidding continues to dominate the auction landscape, as proving somebody is a dummy bidder is not always easy.
Most auctions involve some form of deception and misrepresentation. First there’s the dummy bid, which is nothing more than a figment of the auctioneer’s imagination and is only put in to get you to pay more; its sole purpose is to deceive you into believing there are multiple parties interested in purchasing the property at the level of their bids, which is not necessarily the real market value. This is tantamount to fraud; it is orchestrated to obtain financial advantage from one party by deceiving the other. Many real estate agents simply rig the auction prior to the commencement; however, for a bidder with a well-trained eye, it is easy to spot the auctioneer as he or she takes dummy bids, looking like the conductor of an orchestra, bouncing the real bidder off against the dummy bidder.
A client was looking at a three-bedroom, single-fronted weatherboard house, close to shops and transport. She was uncertain how much it was worth and unfamiliar with the process of an auction. From our research before the auction, we worked out that she was the only interested party The auction began with one dummy bidder competing against another dummy bidder, with the auctioneer trying to run up the auction without any real bidding. After the fourth dummy bid I asked the auctioneer which one of the three stooges I was bidding against. The dummy bidder took offence and claimed: “I’m no stooge!” which of course we didn’t believe and replied, “Why are you so upset then?” The auction stopped abruptly and the property was passed in. I bought the property 10 minutes later for my client for $30,000 less than the price it had been passed in for and considerably less than she was prepared to pay.
You should approach buying property almost as a contact sport. Bidding for a property is not supposed to be fun or a picnic. It is a serious business and you need to be able to stand firm when needed. It is not a walk in the park. Unfortunately, most purchasers only face the prospect every 5 to 10 years and are totally naive about the games that are being played before their very eyes. You are not there to be friends with the agent, the vendor and certainly not with the other bidders. Your aim at the auction is to buy the property at the best possible price. Bold bidding does show confidence to other bidders.
– David Morrell