Dirty tricks to secure properties at auction

The Australian Financial Review reports that unscrupulous buyers, with the help or encouragement of certain buyer’s agents, are using dirty tricks to secure properties at auction in our current hot auction markets.

They say the practice, known as “collusive bidding”, involves two or more bidders who represent the same buyer, but creating the impression that there are multiple buyers bidding for the same property.

Apparently the idea behind the ploy is to create an expectation in the vendor’s mind that there is good activity below the reserve, and so encouraging the seller to put the property “on the market” rather than pass it in.

This is a tactic that the team of buyers agents at Metropole have never been involved in and it’s obviously illegal, but apparently it’s happening as two Melbourne buyer’s agents told AFR Weekend they used the tactic at auction and a Sydney buyer’s agent said he knew of the practice.

I can see collusive bidding could be more of a problem in Victoria, where bidders are not required to register before auction, meaning anyone can turn up on the day and raise their hand and bid.

Whereas in NSW, only registered bidders can bid for a property.

A spokeswoman for NSW Fair Trading said collusive bidding was illegal under NSW legislation. Penalties can be up to $55,000 for corporations. Real estate agents can lose their licences.

“Regulations state that a person must not induce another person to abstain from bidding or do anything in any way which may prevent free and open competition,” she said.

[sam id=43 codes=’true’]Fair Trading has received 55 complaints about auctions so far this year – seven for alleged dummy or collusive bidding.

While collusive bidding is another unethical ploy it should not intimidate you from buying a property at auction. I’m not fussed how many other bidders there are or the tactics they employ.  

I go to auction with an upper limit set in my mind (but being prepared to exceed it a little in the current hot market if need be) and them bid strongly form the start –setting my opening bid close to where I think the reserve bid will be.

This strong opening often startles other potential buyers as does the firm way I continue bidding and it must be working.

Sure the team at Metropole loses out at auctions when emotional buyers who are either smarter than us, or dumber than us, bid much more than we do; but we win more than our fair share of prize property purchase by knowing how to play the auction game.



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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