What just happened? Auction goings on in BNE

I'm new to property and looking for my first place, and in between looking at places I'm actually interested in buying, I stopped by an auction. I've been to auctions before, but this is the first time I actually paid attention to what was going on.

The property for sale was a 60s 3BR freestanding house on a 405sqm block about 5km out of the Brisbane CBD. The auctioneer gave his spiel and asked for bids "starting with a 5" which seemed fair enough. After a few minutes of silence one guy bid $550k. After the auctioneer tried unsuccessfully to solicit higher bids for a few minutes, he said he'd talk to the vendor. He also went over and spoke to the bidder. After some faffing about with auctioneer going the vendor and the bidder, the auctioneer announced the bidder has increased his bid, but didn't give a number. After some more faffing about, he reopened bidding at $590k, which is apparently what the original bidder had agreed to increase his offer to. And with no more bids, that's what it sold for.

As I said, this is first auction I've ever attended where I've actually paid attention to what's going on, and I'm confused. Why would the original bidder have increased his bid, if it was clear no one was interested in bidding at that price? Was it good salesmanship of the part of the auctioneer to extract a higher offer where there was no competition? Or is what the buyer did normal in this situation?

I'm curious to hear people's thoughts

 

Reserve

 

They had to have an intermission to refer to the rule book to see if they were doing it right

 

Would have not increased my bid and let it pass in, then negotiate after auction in a stronger position. Been in that situation quite a few times and got a better deal after auction with vendor in a weaker position. Agent outplayed the buyer quite easily.

 

He was negotiating with the seller (through the agent). Press the bid up as he's been told is not enough to buy.
590 is pretty good for 5kms

 

Not uncommon for that to happen .

Depends on how much the bidder wants the property and what they think it's worth .
It maybe next door to their mother and they want something close to her .

They might think it's worth 650 .

Or they could be an easily manipulated noob .

We saw a unit pass in around 980 last weekend which was subsequentally sold for around 1.05 later that day .

Cliff

 

I do find the OP's experience odd.

In Victoria, there would be a vendor bid In this situation, with the auctioneer making the vendor bid and clearly announcing it as such.

Then the real bidders would have the chance to beat the vendor bid in the public bidding process. Quite common for the agent's reps to go to each bidder during the bidding to find out their intentions, and say things like 'you're very close to reserve' etc...

If no more bids were received, it would be passed in and the highest bidder prior to passing in has the chance to negotiate.

 

Agree with @Leo2413 .... bidder got played by agent... likely newbie... learn from hindsight.
Let it pass in and negotiate afterwards

 

Running a risk though that someone else will come in just after them and end up being top bidder, though.

If the buyer really wanted the house, and if it's for a popr, then paying a bit more to secure it and remove this risk, can be the smartest move.

In Melbourne auctioneers, will actually push people to be the top bidder in an auction that is clearly going to be passed in. Which of course gets the price up a bit further prior to passing in.

Here, if I went to any auctions where a house went for just $40,000 more than opening bid, I'd have more houses!

 

Lol - I love it how ppl come up with these assumptions without knowing any details at all.

How do you know that it wasn't a good buy? Why would you risk letting it pass in for someone else to enter the negotiation?

 

What suburb if you are prepared to say? Understand if you want to keep it quiet. Lots of investor interest in bne atm

 

Thanks for your thoughts guys.

This is how it looked to me as well. Without having actually bid at an auction before, not raising the bid seemed like a more sensible course of action. There were other registered bidders there that had plenty of opportunity to beat $550k.

But I take the point of @See Change - there's a lot of reasons he could have wanted to make sure he got that place.

Yes it was a good location, nice and close to the city, but during the 40 minutes I was there, 2 jetliners passed quite low overhead en route to landing at Brisbane airport. They were loud enough that the agent had to raise his voice to get over the one that flew over while he was doing his spiel haha... Probably bearable, depending on how early/late they come through, but too close for my liking.

 

That's basically the way it works,they go as high as the bids will take them then unless they reach the required price,then the agent will have to try to balance the numbers between the final bid and the price,and going by the price zoning within the 5klms inner cbd ring depending on the location the 590k price may have been very good value..imho..

 

Fair point, it could still have been a good deal when the buyer accepted a 40k jump to 590k as we don't know the details. It's a personal strategic approach decision. I would rather take the risk of letting it pass in to negotiate a better price after auction as I would probably have 3-5 other deals being negotiated on at the same time.

I do believe that generally speaking it's not a good idea to just agree to a higher amount in an auction if your the highest bid already though. After auctions many vendors are usually in weaker more vulnerable positions giving the buyer the upper hand,

 

This is why auction is not for the faint-hearted.
I have been to many auctions, run by different type of agencies.
Recently I accompanied a friend to an auction with hundreds of properties, pretty humiliating for a newbie investor. I think she was relieved that I went as I was so much more calmer than her.
My short advice is: do your research thoroughly, know what are the strength and weaknesses of the property, the potentials and pitfalls, and lastly, know your bottom price.

 

Why not put up the address @fleathedog so everyone can put in their 2c on whether the buyer overpaid.

At face value it may appear the buyer was played by the agent, however it could have also been a sneaky tactic by the bidder to up their offer by such a significant amount without other public interest to make it appear he was bidding too much and scare off other interest.

 

Could it have been negotiated cheaper?
Maybe, maybe not.
No one will ever know.
Clearly the vendor and buyer reached an agreement which is the whole point.
Marg

 

this in Brisbane,over here, consider yourself lucky if you get even a single bidder at auction. ..no matter how well priced it may seem.

 

This is why I love auctions as you can see who the competition is and what exactly they are willing to pay.

However I hate it as you have to be unco (this also limits people) and as such you can spend money doing B&P inspection for nothing.

Doing it private you have no idea what any (if there are any) purchasers are doing. You have to go with your gut and if you call a bluff you have to be prepared to see the property be sold even if it is below what you would pay for it.