Wednesday, March 30, 2011

Australia's crazy house auction system

So you want to move house in Australia.
The majority of houses here are sold at auction. The effect of this that you as the seller spend four or five weeks wondering about what you will actually get for your current property. This is hard on the nerves. Then to make things worse, you need to start looking at properties that you would like to buy, but you do not know how much you will get for your place and you do not know (other than a price guide figure) what you will need to pay for your new place. Some agents set the guide price deliberately low in order to get plenty of bids at the auction. I read of a recent auction with over 60 bids. Most of the potential buyers had paid fees for building and pest inspections and having already spent this money, the agent is banking on them bidding above their original limit. The property actually sold for a figure that was 25% higher than the guide price and a lot of auction attendees must have felt duped.
I attended a house auction 12 months ago and I found the whole atmosphere was very intimidating and I was only there as an observer. The auction took place in a public room and a dozen properties were being sold. As a property was being auctioned, the auctioneer could be like your best friend if you were bidding and trying to convince you to up your bid. Once you placed a bid, the auctioneer was suddenly your worst enemy as he was telling someone else that they only had to outbid your bid by another 10k and the property would be theirs. Once they placed a bid, the auctioneer switched allegiance to another bidder and so on. All around the room were about 15 agents all in their best business attire. During the auction they would walk around the room and up to potential bidders trying to coerce them into increasing or placing a bid.
Only about 25% of the properties were sold as some had already been sold prior or had been withdrawn. I walked away from that auction stunned at the intimidation. Not good if your are of a nervous disposition.
None of this sounds very good but in practice it is even worse. This is because all agents here demand an upfront marketing fee. This is a significant amount of money that will be lost if you do not eventually sell. On top of this the agent will want a percentage fee on the sale proceeds.
So, if you want weeks of nerve wracking tension and to risk significant sums of money without knowing where you may be living, then try moving house in Australia.
I come from England and love a lot of things about Australia, but this is not one of them.
If an English style estate agent who works on a "no sale, no fee" basis came to Australia and employed some local people with local knowledge they would clean up.


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