The "Private Auction" – A Haven For The Dummy Bid

Peter Mericka — Tue, 01 May 2007 05:45:00 GMT

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

The dreaded "dummy bid" never really went away; it simply mutated into a more insidious form through the concept of the "Private Auction".

Bell Real Estate, a prominent real estate agency operating in the Eastern Suburbs and Yarra Ranges areas of Melbourne, uses the "Private Auction" as a standard procedure, and even provides intending purchasers with a set of guidelines. (Click on the attached image for a full view of a set Bell Real Estate’s guidelines, recently handed to one of our clients.)

The indicators of the "Private Auction" include:

A vague or otherwise undisclosed sale price;

A call for the purchaser’s “highest”, “best” or “strongest” bid;

An assertion that other intending purchasers are competing;

Confirmation that there will be no negotiation (i.e. that there will no further opportunity for purchasers to increase their offer.)
The "Private Auction" has now attracted the attention of the authorities, and may well be banned in the future.

In this posting we will examine the "Private Auction" guidelines given by Bell Real Estate to intending purchasers, and demonstrate the potential of the "Private Auction" to disadvantage both the vendor and the purchaser, while delivering the to the estate agent the sought-after commission.

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The "Private Auction" – A Haven For The Dummy Bid