Saturday, March 28, 2009

Real estate auctions

At the recommendation of Beth and David Ebert, we went out to a real estate auction. Apparently it's a natural and very common thing here. Completely unimaginable in the US. So here's how it works...

The house is open for about a half hour and people walk through like a normal showing- even without auctions its typical in Australia to show an open house that only lasts 30 minutes. In the US open houses are typically all day and you wander through at your leisure. Not so here, it's a galloping stampede of potential buyers and then poof it's over.

The difference with an auction is that they then herd everyone out into the front yard and everyone stands in a big circle. In our cases there were probably 30-40 buyers. Everything you could imagine, young couples with dogs, people in biking clothing, hawaiian shirts, asian investors, rail thin college girls looking weak from hunger with the large sunglasses on the forehead (beaming dad or mom in khaki shorts in tow), you get the idea.

Then there's two real estate guys in the nicest suits and the whitest shirts and the loudest ties you've ever seen. I could almost see a mirage above their heads from the cologne wafting off them. You must also understand that in South Yarra, there is no front yard to hold the auction in so half the people were on one half of the street and the other half were on the other and cars were driving in between.

There was a long "ladies and gentlemen what a wonderful house we have before us" speech (this was outdoors so it was shouted... the job of barker is for extroverts only) and then there was also some legal mumbo jumbo (you can't put in shill bids, you can't prevent someone else from bidding). After about 15 minutes of introduction the bidding began when the agent solicited a bid.

There's a couple things that can happen. The "vendor" (the sellers agent) can put in a minimum bid (only one bid I think). Next, people can bid up from that. At some point the seller's reserve is met and the barker says the "house is now on the market", i.e. we're not kidding around now, if you're the highest bidder, you're moving in and need to cough up the dough. If you win you go in and sign the contracts put down your deposit and you're done.

At one auction we went to (we never got to go inside, we got there late), the place was apparently a bit of a dump, someone smoked in it for years and it was 1 bedroom 1 bathroom apartment with a parking space. But the location was excellent. To bid, people just raised their hands or gave a nod to the auctioneer. Bidding started slow, $260k AUD ($180k US) and in the beginning was mostly between two couples. An asian kid clumsily jumped in at one point with a bid. Then a 4th guy (middle aged) put in a bid. They went up in intervals of $10k, and then slowed down to $5k and eventually $1k.

At the end the middle aged guy was bidding against a slick tanned blonde guy in a trim suit and blue mirrored glasses. Stoic, he was the definition of cool, he didn't even lift his hand to bid, he just raised his eyebrows or jutted out his chin to signal. Bidding ended at about $330k. There were probably 30 bids in all back and forth, very lively.

The second we went to was another nice place in a great neighborhood, two bedrooms one bathroom, but totally remodelled. Indeed, Christine thought it was too remodelled, e.g. the kitchen drawers didn't open all the way without hitting something else. Most of the newly planted trees had died from the heat/watering restrictions. The sellers handed out a flier of comps that were $720k AUD ($500k USD) and up.

Bidding started and there was dead silence. I really think a tumbleweed blew by. A loose gate knocked on its hinges in the distance. Stunned. The silence broke when a hunched-over old lady shook her cane in the air and croaked "$500" ($345k USD). Nervous laughter. The sellers agent entered the vendor bid at $680k (I guess that's to prevent someone from walking away with it for $1... but it's always the second bid just in case someone has no clue what it's worth and way overbids right out of the gate). Lots of "going once, going twices", "going one more time" and so on.

So the seller's agent stopped the bidding and he announced that he would go inside and negotiate with the seller. The seller could've agreed to a lower price and restarted the auction. However, after about 10 minutes the agent came back and said a lot of mumbo jumbo again that eventually someone translated to me and christine as "the seller's not going lower, take it or leave it". In the end, nobody took it, everyone dispersed and I guess later on the house is just going to go on the general market (called a private sale)

Kicked ourselves for not having a camera because the Eberts explained how all this worked and we couldn't envision it. It was so foreign to us... but it was just like how they said it would be. It felt a bit like watching a foreign ritual like where villagers run along the backs of a line of oxen or where they bungee jump off platforms using jungle vines.

1 comment:

  1. Wow - sounds fun. Most of the Auctions ive seen over here in New Zealand are dead as dead things right now. A few months ago I went to an auction of 6 properties in one sitting. A room packed full of people and only one bid out of the whole show! I did feel sorry for the agent.

    If you think you may want to bid at an auction - it's worth reading Neil Jenman "Don't Sign Anything". It will tell you all the tricks you need to know. Its actually written for Australia, even though its also useful for us here in NZ.