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Auction Fiasco

Melbourne is the auction capital of the world. I personally believe it is an overused method of selling a property.  Before choosing the best method of marketing a property a number of important determinants need to be assessed before a correct choice is made. The current state of the market, likely level of demand for the property and a vendor's time frame are some factors that need to be examined before a decision is made.

With the right property and in the right circumstances the auction method can and does work well. However changes need to be made to make the process less ambiguous. The most critical point of an auction is when the property is announced on the market by the auctioneer. Unfortunately as the legislation stands at the moment there is no structured and mandatory statement required by the auctioneer that clearly announces that the property is on the market. There also needs to be a structured and mandatory method of knocking the property down to the successful purchaser. During an auction many bidders are unsure of when the property is actually on the market. Also, if the property is passed in there is no mandatory method used by selling agents to deal with the highest bidder. Selling agents claim that the highest bidder has first right of refusal at the reserve price. Does this mean they are allowed one offer or multiple offers before other parties are introduced into the negotiation? This is interpreted different ways by different real estate agents.  There is no consistent process used by auctioneers in the three above mentioned situations. This can cause confusion and fear amongst the inexperienced buying public. Some auctioneers play on this uncertainty for their own benefit. This situation can and has lead to disputes.  

At a Burwood East auction late last year a bid was accepted by the auctioneer after the property had been declared sold. As a result of this and other similar incidents the REIV have called for a binding contract to occur on the fall of the hammer. If a binding contract is to occur on the fall of the hammer it becomes even more critical that the auction rules cover the situations mentioned above and therefore are clearly understood by all buyers.

 

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