Auction question

Discussion in 'The Buying & Selling Process' started by lettert, 17th Mar, 2020.

Join Australia's most dynamic and respected property investment community
  1. lettert

    lettert Well-Known Member

    Joined:
    25th Oct, 2019
    Posts:
    99
    Location:
    Vic
    Two interested parties at auction. Reserve is 1.45mn

    One party bids 1.25 (opening bid) and then no more bids, including from Interested Party #2 who is playing the "wait and see" game.

    Vendor bid 1.45 - property is now on the market - but no-one bids. Possible Bidder #1's limit was below 1.45.

    Why would Bidder #2 make a bid in this case? Wouldn't they be better off just letting the property pass in and then trying to negotiate privately?

    And to put in more general terms, Bidder #2 sees there's only one other interested party, why would they bid at all?
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,035
    Location:
    Australia
    If buyer 1 makes a call and can get more money....
     
  3. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,327
    Location:
    Here.
    Bidder 1 will have the first right to negotiate. Unless Bidder 2 puts their hand up, they may loose any chance to negotiate at all and Bidder 1 may get the property for less than they might have paid.
     
    Terry_w and significance like this.
  4. lettert

    lettert Well-Known Member

    Joined:
    25th Oct, 2019
    Posts:
    99
    Location:
    Vic
    Does this really work? And even if so, by not bidding after the VB and property was on the market, isn't Bidder 1 tipping their hand that their budget is below 1.45?

    Of course, they could maybe try to rustle up funds asap...

    But to add to the drama, Bidder #2 made an offer prior to auction of 1.45, which was rejected...

    It still seems to me that given the situation Bidder #2 might be better off staying silent and hoping to negotiate after the property passes in?
     
  5. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,035
    Location:
    Australia
    You assume bidder 1’s limit is less than 1.45. What if its not and they just dont want to pay that much? A passed in auction can make a vendor more open to negotiation.

    if bidder 2 was willing to pay 1.45 pre auction, why not bid 1,450,100 and get it?
     
  6. lettert

    lettert Well-Known Member

    Joined:
    25th Oct, 2019
    Posts:
    99
    Location:
    Vic
    @Trainee I guess Bidder 2 should just bid an extra 100 and get it....

    But I guess no need to bid unless property is on the market?
     
  7. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    6,035
    Location:
    Australia
    Your scenario says

    always a battle between how much someone wants it and how much they want to pay.
     
  8. pinewood

    pinewood Well-Known Member

    Joined:
    8th Jul, 2015
    Posts:
    149
    Location:
    Vic
    It depends on how much # 2 wants the property. At an auction the last bidder always has the first option to negotiate with vendor if auction passes in. If bidder #2 is really keen on property then it pays for them to be the last bidder to be given the option to negotiate. Staying silent will put him out of the game if bidder #1 manages to successfully negotiate with the vendor a price. So even if the property is not yet on the market #2 needs to make the last bid if he really wants the property.

    @Trainee is right if he was already willing to pay 1.45, any bid above 1.45 meant he would get the property.
     
  9. FredBear

    FredBear Well-Known Member

    Joined:
    7th Aug, 2018
    Posts:
    277
    Location:
    Sydney & Abroad
    Could vendor #2 bid 1.3? Just ignore the vendor bid, the auctioneer won't take vendor #2's bid, but vendor #2 has signaled that they will pay more than #1.
     
  10. lettert

    lettert Well-Known Member

    Joined:
    25th Oct, 2019
    Posts:
    99
    Location:
    Vic
    Does this work? Can you bid less than the last bid if the last bid is VB?

    I agree with comments that Bidder#2 should just bid 1400100....
     
  11. momentum26

    momentum26 Well-Known Member

    Joined:
    16th Mar, 2018
    Posts:
    95
    Location:
    Australia
    Once a vendor bid is made, wouldn’t this mean that property is on-market ideally at the vendor bid? and anyone who bids over VB gets the property.
     
  12. kaibo

    kaibo Well-Known Member

    Joined:
    30th Jul, 2017
    Posts:
    521
    Location:
    Melbourne
    This post is weird. How do you know there are just 2 interested parties? and their budgets?
    You cannot have a vendors bid and be on the market as vendor cannot buy their own property. Bidder 1 who the vendor bidded over does not have first right to negotiate at vendors reserve as the auctioneer is holding it via VB

    How do we know there isn't someone who was happy to pay 1.5M but needed subject to finance. You can't bid less than the VB

    What I would do in that situation is take the risk of a pass in on vendors bid and hope to get it for less but if I am keen on this property (PPOR) I would tell agent loudly that I would only bid if they assure me no more vendor bids.and they oblige as finishing on a live bid is always better for them as long as it is close to reserve