14 Real Estate Auction Tricks

Here are 14 real estate auction tricks which trap thousands of home buyers and sellers. Don’t let them trap you.

1. The Dummy Bidding Trick

2. The ‘On the market’ Trick

3. The Frenzied Buying Trickreal estate auction tricks

4. The Attract Buyers Trick

5. The Lots of Buyers Trick

6. The Definite Date Trick

7. The Set Time Trick

8. The Quicker Sale Trick

9. The Percentage Sell Trick

10. The Competition Trick

11. The Buyer Bait Trick

12. The Conditions Trick

13. The Three Stage Trick

14. The Fall of the Hammer Trick

We start our list of real estate auction tricks with the most notorious and well known real estate tricks…

1. The Dummy Bidding Trick

How do you have auction if you only have one buyer? Well you don’t do you. You just can’t. A dummy bid to an auction is like a spark plug is to an engine.

Read more about how dummy bidding traps home sellers.

2. The ‘On the market’ Trick

When the bidding for Sharon’s home reached $495,000, the agent used a common crunching trick. He told Sharon that to “stimulate the bidding” and get the price higher she would need to put her home “on the market”.

Many sellers do not realise that “on the market” is industry jargon for “selling at the price offered”.

No Time To “Dwell on the Price”

The aim for most agents is to make the sale at the auction by using high-pressure tactics before consumers realise what is happening.

A manual published by the Real Estate Institute of Australia teaches agents what to do. It says “ Move Quickly”, Don’t give them time to dwell on the price”.

real estate agent threatsThe trauma to consumers last long after the agents have spent their commissions. Today, Sharon still has nightmares and says she can burst into tears just thinking about what happened.

Agents may use methods that don’t give consumers time to dwell on the price or on the consequences of instant decisions but, later, consumers have plenty of time to dwell on what happened.

For many people the trauma is so severe they never recover. They suffer for the rest of their lives from a system which has always exploited sellers and buyers. The real estate industry has known for years the pain inflicted on consumers with auctions.

Horror stories are denied or covered up. Meanwhile, the industry still touts auctions as a fair way to sell or buy property, never mentioning the grave risks or that there are no second chances when making such mammoth financial decision, usually alone and unprotected on a weekend.

How Auctions Remove the “Pause Button”

When agents push consumers into making spur-of-the-moment decisions, they remove one of the most fundamental safety points in negotiation – the ability to be able to think it over.

In negotiation, this thing is called being able to “push the pause button”. When this gambit is taken away, consumers are at mercy of agents.

At auctions, agents place tremendous on consumers to “act now”. When the bidding pauses, sellers have eyes of the crowd upon them.

The auctioneer may yell, “We are just getting instructions from our vendors”. But the vendors who gave the instructions before the auction, are now being publicly pressured to change their “instructions”. The agents wants a sale. Now.

Embarrassment and intimidation is a deliberate manipulation strategy at auctions.

3. The Frenzied Buying Trick

Agents say that buyers get swept up in the emotion of the auction. This rarely happens. Sure, at some auctions for low cost items, such a bric-a-brac or clearance sales, people might get carried away. Auctions for family homes are entirely different to clearance sale auctions.

Buyers cannot bid more than their financial limits. The way agents talk about the “frenzy” at auction, it appears that buyers have unlimited funds. Buyers do not buy because of the auction. They buy because they want the home. The method of sale does not increase their ability to spend.

4. The Attract Buyers Trick

Agents say that auctions attract more buyer. This is not true. Auctions repel buyers.

Buyers generally detest auctions.They often say “We do not want to look at anything for auction”. They only turn up to auctions if it is the only choice for them. It makes no sense to offer a home for sale using a method that most buyers detest.

This is especially true in areas which agents call “auction areas”. The agents will tell sellers, “In this area, everybody uses auction. If you don’t auction, people will wonder why”.

This is even more reason to avoid auction because more buyers will be available to look at homes which are not being auctioned. In “auction areas’ buyers want to buy homes just as they do in all areas.

Buyers aren’t attracted to auctions, they are attracted to homes.

5. The Lots of Buyers Trick

The reason there are often lost of buyers at auctions is not because the buyers are eager to pay a high price. On the contrary, the buyers have been tricked into attending auction by being told that they “may” get a bargain.

It is easy to have lots of buyers if the price is low. They are eager to pay a lower price,not a higher price.

A home can only be sold to one buyer. When one buyer who can pay the best price is surrounded by buyers who want to buy for a low price, the best buyer is influenced to pay less,not more.

One agent explained it this way. ”Sometimes it’s hard enough to find one buyer for a home, never mind having to find two which is what is needed with auctions. The only way to get two buyers is to lower the price.This does not help the sellers.”

The more buyers who want to buy for a low price, the more likely you are to get a lower price. It is not buyers (plural) that you want for your home, but one buyer who will pay for the best price.

The best buyers pay less because of the auction. As New Zealand broadcaster Brian Edwards explained, “The aim of the auction process is to flush out all the prospective buyers. This argument is deeply flawed you aren’t of course, flushing out all the prospective buyers, only the elite group of cash buyers who can afford to commit themselves unconditionally on the day.”

Don’t be fooled by the “lots of buyers” trick.You need the best buyers,not lots of lookers or bargain hunters.As shown with advertising, the more people who see your home and do not buy it, the more you damage the value of your home.

6. The Definite Date Trick

Auction agents will say you get a set date when your home will be sold. But why wait weeks? Many buyers want to buy immediately. If they see an auction which is weeks away, they can lose interest. This is especially true if agents insist that the home “goes to auction”.

Calendar_DateThe reason agents like homes to be sold at auction is because it makes auction look successful.

Some agents, if they get a buyer before the auction, will not want the home to be sold because they have not spent all the seller’s advertising money. This is common. “We have to keep our profiles high, say the agents.”

Many buyers make offers before an auction which are declined. The agent will tell the owners, “You might get more at auction.” But the sellers often get less at the auction. As one buyers’ advocate boasted, ”I have bought homes for $100,000 less than my clients offered prior to the auctions it happens all the time.”

7. The Set Time Trick

Brian and his partner were devastated.They arrived 25 minutes late at the auction and the home had been sold. But what really hurt was the selling price. It was $155,000 below Brian’s maximum price of $480,000. But there was still hope. Brian spoke with the buyer who had just paid $325,000. He offered him $50,000 to back out of the sale. The buyer refused. Saying that he too had been prepared to pay much more. Brian then offered the buyer $100,000 to pull out of the sale. He stilled refused.”

For the sake of 25 minutes, the seller’s missed out on having two buyers bidding for their home.

bad times aheadIf Brian had arrived on time, he would have bid to $480,000. Twenty-five minutes cost the sellers $155,000.

There are many stories of the people not making it to an auction on time -an accident, a speeding ticket, a wrong time printed in an advertisement, bad weather.

There are hundreds of ways a set time can backfire on the sellers. Sellers never know who does not show up. According to one report, a homebuyer speeding to an auction tooted his horn as he overtook an unmarked police car. The police gave the chase but the buyer kept going, driving on footpaths and on the wrong side of the road.

Finally, the police cornered him but he still tried to escape. Senior Constable James McCashney told the court that the driver’s excuse was that he was “running late for an auction”. He was fined $1200 and disqualified from driving for six months. Apparently he did not make it to the auction.

The Real Estate Institute of Victoria is aware of cases where the auctioneer arrived so late that the crowd had gone or worst of all, the auctioneer never showed up.

8. The Quicker Sale Trick

Saying that auctions sell homes more quickly than other sale methods is one of the biggest lies in real estate.

It’s not the auctions which make the homes sell more quickly, it’s the prices and the pressure.

As with the definite date trick, many homes would have sold sooner if the buyers did not have to wait for the auctions.

If the homes that sold at auction had not been auctioned, almost all of them could have sold just as quickly. And for better prices.

9. The Percentage Sell Trick

Many agents fudge auction results to make auctions appear more successful.

They will ignore properties which are passed in (meaning they failed to sell); they will count sales made before the auction and after the auction as sales made at auction; they will include sales made by private treaty as auction sales; they will misreport the names of the suburbs to create the perception that they have a bigger market share.

And, of course, they will always report the amount by which properties have sold above the reserve and never mention how much the properties sold below the price the buyers were prepared to pay.

The fudging of auction results is common in real estate.

10. The Competition Trick

To say that competition forces up prices is only part of the truth. If the competition is in public, as happens as auctions, each buyer sees what other buyers are offering. Instead of offering their highest price, each buyer only offers a small amount above what the other buyers offer.

As already explained, this is how auctions get the second best price, not the best price. The bidding is comparative (NOT competitive) because each buyer compares their bid with that made by other buyers. The price then stalls when the final bidder sees the others stop. Such public comparisons cost sellers thousands.

11. The Buyer Bait Trick

When an agent says “bidding to start from” then whatever price is being advertised is the price at which buyers will be attracted. If you want $500,000 and the agents attract buyers who want to pay from “$400,000” it can be hard to get them to pay $500,000.

At the auction you will have a crowd of buyers attracted by the $400,000 bait price. OF course the agents can push them up in the price. But to what level? If the bidding stalls at $450,000, the agent will say, “This is what the market is telling us your home is worth”. But the agent has been looking in the wrong market.

If you want to sell a home at $500,000, the first thing you need is a buyer who can pay $500,000.

12. The Conditions Trick

Agents will say that when you sell by auction you can set the conditions. You can put whatever you want in the contract and the buyers can’t change it. Aside from this not being true (the buyers can ask for anything to be changed before the sale), when you put tough conditions in a contract, you risk repelling the best buyers.

13. The Three Stage Trick

Agents say you can sell before the auction, at the auction, or after the auction. They call it a “three stage” process. But this is just an excuse for when the homes does not sell at the auction.

And herein lies one of the biggest auction traps – homes that do not sell.

Everyone wants to know what happened. “With all that advertising, with all those inspections and that huge crowd at the auction, you mean it didn’t sell?” say the astounded buyers.And then comes that price-killer question, “What’s wrong with it”?

The major thing wrong with the home that doesn’t sell at auction is the agent recommended the auction.

14. The Fall of the Hammer Trick

Agent say that one of the benefits of auction is that buyers cannot change their minds. Neither can the sellers. If either the sellers or the buyers, make a mistake at the auction, they are both caught.

This trick benefits the agents more than the sellers and buyers. It means that once the hammer falls the agent gets paid, no matter how the sellers or buyers feel. Or does it?

When journalist Amanda Hodge was the final bidder on a St. Kilda home, the auctioneer yelled, “Sold”. He shook her hand. Suddenly another bidder emerged.

The auctioneer restarted the auction and the home was sold to another buyer. Amanda’s “purchase” lasted mere Real Estate Auctionseconds. She discovered what many agents have always known -the fall of the hammer is a charade. It means nothing. It is now – and always has been- one gigantic bluff on the part of the agents.

Until a contract is signed by both the sellers and the buyers, no sale is certain. As one lawyer commented, “The fall of the hammer is meaningless”. Other lawyers agree. One said that auctioneers who tell bidders they are legally committed to proceed are “perpetuating a fraud” because no one is legally committed to anything until they have signed a contract. If you are selling or buying at auction and you have been pressured into making an instant decision, the rule is simple: do not sign any contract until you seek independent advice. Even if the agent says you are legally committed, don’t be bluffed. Don’t sign anything.

Just walk away and find a lawyer. Agents who don’t keep their word are often quick to force you to keep yours. Morally, if you have given your word under duress or trickery, you should not sign anything. Just remember that at every auction a consumer loses. Make sure it is not you.

This article has been compiled from extracts of the controversial, best selling real estate book by Neil Jenman – DON’T SIGN ANYTHING! We currently have a limited number of copies of DON’T SIGN ANYTHING! to give away.

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