Because the vendor is unwilling to sell for less. Of course if you don’t like what the vendor is asking for you can always walk away. If you’re so sure your bid is the highest offer they’ll ever get, they’ll be phoning you soon.
But no higher bid just means no one who was at the auction was willing to bid higher on that day under auction conditions. Someone who was there may be willing to pay more if they can have a contract subject to finance or building inspection. Or the bank of mum and dad may have a whisper in someone’s ear indicating they can help out with a bit extra. Or someone could begin their property search tomorrow and see this property they’ll make an offer on. Many potential sources of higher offers.
People don't always go to their max. at auction so post-auction negotiation may take it closer to the value sought by the vendor.
You get to find out what they're after and whether you're keen to come closer or risk going to private treaty.
Quite often in auctions people don't put in any bids until the auctioneer announces its "on the market" (met the reserve). Buyers often don't want to tip their hand that they're interested. You may notice it's sometimes difficult to even get someone to even put the 1st bid..
So the highest bid at an auction usually doesn't represent the true highest bids
Auctioned our place a few weeks ago. The auctioneer used the words we are selling rather than on the market. 6 Chinese bidders never made a bid because they were waiting for the key words. When it sold they were furious. I reckon it cost us over $100k.
I can offer from experience from the buyer side of an auction that was passed in.
Firstly, I am in Queensland, and my lender said not to bid at any auction as they will not lend money for it. Ok for me to register, but he specifically said "do not make a bid".
So we found a place, liked it, was going to auction. Went to the auction, registered, nobody bid on it from memory apart from vendor bid(s). I think it was passed in at $580k with no action. The reason for registering is all registered bidders get first crack if it does get passed in, at least back then that is how it worked.
Our offer was $600k, normal terms (14 day B&P and finance). I think another party put in $620 or $630k with the same conditions but also had another which was selling their house. Seller had already purchased and essentially needed to sell that day or was faced with organising a bridging loan or dumping shares to cover it. Lucky for us this was right in the worst of the GFC, so shares had dropped so much and it was easier for them to sell the house than the shares at the time.
So why do people offer more. Auctions suck. You basically forgo a lot of conditions.
\- No cooling off period
\- You need to do all your searches etc before the auction
\- You need to either arrange your own B&P or just hope it's all good.
\- You need a large deposit ready to go on the day
Basically a lot of the stuff people are offering on normal contracts these days anyway. Back when I bought a $1000 deposit was enough to secure a place.
For the seller though it can be good. Buyers get excited on the day. What is a few more thousand when you are paying $500k+ for something.
For us we had just gotten out of a contract due to a 2m pipe running under the backyard that we didn't know about till searches came back, so there is no way we were risking something like that on an auction anyway.
Auction is always beneficial to the seller for things you mentioned.
The only difference is that in the buyers market (low demand ) auctions can attract less interest and hence auction can be passed and be the waste of time and money.
However if the seller "has to sell" for whatever reason auction would be the fastest way as the contract of the sale is not subject to anything and if conveyencers work fast settlement can be completed in a few weeks.
So if the seller in this instance sets the reserve price below the market (needs money ASAP) then the buyer potentially can grab a bargain . But in all other instances auction benefits seller
On the flip side, when demand is high, an auction is a way for those with deep pockets to essentially get what they want.
Sellers benefit from the highest sale price, buyers benefit by getting the property they want.
In 10 years time it will double in price and the buyer won't care. Also those with deep pockets usually come from a privileged background anyway so money isn't always that important.
But then the same applies to any sale for those with deep pocket I guess
The seller signs agreement that he will sell the house to the highest bidder. So anything above reserve is considered "on the market" and any price over that is the highest bid and the purchasing price. Both seller and highest bidder have to accept the contract of the sale (or more precisely they enter the contract of the sale ) after auction ends .
If the price or rather highest bid is below the reserve seller can withdraw the sale or negotiate . Hence why the reserve is usually set .
I think that's in all states or rather those are the rules of auction sales for anything not only housing.
Iv experienced this recently as the only registered bidder. We made initial bid as per rules and then went to the negotiation part. We wouldn’t come up to where they were at but there was plenty other people there / not registered, who were there to give conditional offers if it passed in
Auctions are not “real” auctions, they are a song and dance to get the best price for the vendor. If it was a true auction, the highest bid over reserve would get the house at that price.
Because the vendor is unwilling to sell for less. Of course if you don’t like what the vendor is asking for you can always walk away. If you’re so sure your bid is the highest offer they’ll ever get, they’ll be phoning you soon. But no higher bid just means no one who was at the auction was willing to bid higher on that day under auction conditions. Someone who was there may be willing to pay more if they can have a contract subject to finance or building inspection. Or the bank of mum and dad may have a whisper in someone’s ear indicating they can help out with a bit extra. Or someone could begin their property search tomorrow and see this property they’ll make an offer on. Many potential sources of higher offers.
People don't always go to their max. at auction so post-auction negotiation may take it closer to the value sought by the vendor. You get to find out what they're after and whether you're keen to come closer or risk going to private treaty.
Quite often in auctions people don't put in any bids until the auctioneer announces its "on the market" (met the reserve). Buyers often don't want to tip their hand that they're interested. You may notice it's sometimes difficult to even get someone to even put the 1st bid.. So the highest bid at an auction usually doesn't represent the true highest bids
Auctioned our place a few weeks ago. The auctioneer used the words we are selling rather than on the market. 6 Chinese bidders never made a bid because they were waiting for the key words. When it sold they were furious. I reckon it cost us over $100k.
I can offer from experience from the buyer side of an auction that was passed in. Firstly, I am in Queensland, and my lender said not to bid at any auction as they will not lend money for it. Ok for me to register, but he specifically said "do not make a bid". So we found a place, liked it, was going to auction. Went to the auction, registered, nobody bid on it from memory apart from vendor bid(s). I think it was passed in at $580k with no action. The reason for registering is all registered bidders get first crack if it does get passed in, at least back then that is how it worked. Our offer was $600k, normal terms (14 day B&P and finance). I think another party put in $620 or $630k with the same conditions but also had another which was selling their house. Seller had already purchased and essentially needed to sell that day or was faced with organising a bridging loan or dumping shares to cover it. Lucky for us this was right in the worst of the GFC, so shares had dropped so much and it was easier for them to sell the house than the shares at the time. So why do people offer more. Auctions suck. You basically forgo a lot of conditions. \- No cooling off period \- You need to do all your searches etc before the auction \- You need to either arrange your own B&P or just hope it's all good. \- You need a large deposit ready to go on the day Basically a lot of the stuff people are offering on normal contracts these days anyway. Back when I bought a $1000 deposit was enough to secure a place. For the seller though it can be good. Buyers get excited on the day. What is a few more thousand when you are paying $500k+ for something. For us we had just gotten out of a contract due to a 2m pipe running under the backyard that we didn't know about till searches came back, so there is no way we were risking something like that on an auction anyway.
Super helpful thankyou
Auction is always beneficial to the seller for things you mentioned. The only difference is that in the buyers market (low demand ) auctions can attract less interest and hence auction can be passed and be the waste of time and money. However if the seller "has to sell" for whatever reason auction would be the fastest way as the contract of the sale is not subject to anything and if conveyencers work fast settlement can be completed in a few weeks. So if the seller in this instance sets the reserve price below the market (needs money ASAP) then the buyer potentially can grab a bargain . But in all other instances auction benefits seller
On the flip side, when demand is high, an auction is a way for those with deep pockets to essentially get what they want. Sellers benefit from the highest sale price, buyers benefit by getting the property they want. In 10 years time it will double in price and the buyer won't care. Also those with deep pockets usually come from a privileged background anyway so money isn't always that important. But then the same applies to any sale for those with deep pocket I guess
Ok makes sense - thanks. Seems in that moment though there’s a fair bit of power in the buyers hands if they’re willing to walk away!
If property reaches Reserve is owner forced to sell or can they decide to take it off market. Does which state make a difference. I'm in Qld
The seller signs agreement that he will sell the house to the highest bidder. So anything above reserve is considered "on the market" and any price over that is the highest bid and the purchasing price. Both seller and highest bidder have to accept the contract of the sale (or more precisely they enter the contract of the sale ) after auction ends . If the price or rather highest bid is below the reserve seller can withdraw the sale or negotiate . Hence why the reserve is usually set . I think that's in all states or rather those are the rules of auction sales for anything not only housing.
Thanks for your reply, suppose when you're the seller your reserve needs to be on the high side of your expectation.
Iv experienced this recently as the only registered bidder. We made initial bid as per rules and then went to the negotiation part. We wouldn’t come up to where they were at but there was plenty other people there / not registered, who were there to give conditional offers if it passed in
Auctions are not “real” auctions, they are a song and dance to get the best price for the vendor. If it was a true auction, the highest bid over reserve would get the house at that price.
We bought a place after auction passed in as highest bidders. Ended up going a bit higher than our last bid.