r/newzealand • u/StandOk9112 • 7h ago
Discussion Auctions: Can we do better?
Went to an auction recently and saw how unethical it is as a system.
The auction room consisted of a mixture: first home buyers, investors, developers. All of whom had paid thousands in due diligence costs. And then the bidding started.
As the the reserve price was met, I could see the real estate agent cheerfully informing the vendors of the blood bath ensuing as each bidder kept fighting for the house.
An old lady ended up winning the house, but I looked around at everyone else who had paid thousands. They all lost... Their money, their time. They were all used to make the vendors and real estate agents rich.
What a horrible system. Has anyone experienced this horror show before?
All this hype just pushes prices up further and further, making home ownership less possible for people.
I couldn't sleep at night if I sold my house in this manner.
Thoughts for and against are welcome. I just want to understand: can we do better?
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u/TheseHamsAreSteamed 7h ago edited 6h ago
The whole point of auctions is to maximise price by manipulating FOMO and pushing buyers to compete directly with each other.
I hate it too, so I don't bother going to them. The losers always end up on the general market with a BEO anyway
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u/Dramatic_Surprise 6h ago
Same, we went to one when we were looking and i swore i'd never go to another. We had an agent we kept bumping into who was a fan of auctioning. He had a house we were quite keen on, so i said to him if it fails at auction, then come and see us. Tried mant times to get us to come along but couldnt understand my well if we miss out it wasnt the right house for us mindset
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u/rover220 7h ago
The fact every interested party needs to pay for an inspection separately is really dumb. Where im from the winning bid performs an inspection afterwards. Anything found during said inspection can be used to negotiate the price downwards. If the issues found are serious enough the deal can be nullified.
This way only 1 inspection needs to happen.
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u/FaydedMemories 6h ago
Yeah so if it’s done right, the vendor will commission a building report and pay for a LIM/etc which the agent will put into a due diligence pack. Mainly to save duplication.
Recently gone through this helping my mum sell a property she and her late brother owned. We actually ordered the LIM in advance of selecting an agent (the agent was going to do it otherwise) because we didn’t want to be caught out by surprises ourselves + the stories of processing delays it seemed better to be ahead of it all.
As far as the building report went, we went with the inspector the agent recommended, it was far from clean (which we expected)… the house had problems and was a serious doer-uper. The only slightly shady thing was the agent sort of said A instead of B because B tended to go ham on testing every single outlet/etc which considering we all knew it was obvious that ripping out electrical was needed anyway, it seemed pointless paying extra. There was no hiding of any of the flaws, house was truly displayed warts and all.
AFAIK, no one needed to commission their own reports (and importantly they’re not discouraged from doing their own, they would’ve had full permission if they wanted to), some got up into the crawl space, I think one or two for contractors to drive by and give an assessment. So all up for 6 (iirc) registered bidders, just shy of $1100 was paid for disclosure, by us.
(Edit: of course legal fees for setting up for the potential to bid is probably a matter I’ve missed?)
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u/Single-Malted 6h ago
No-one will trust a vendors inspection report, , you never know whether the inspector was paid to put his blindfold on.
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u/lefrenchkiwi 6h ago
Depends where in the country. While that is certainly the case in a lot/most of the country, in some places it’s the opposite. In Christchurch post quake for example if the vendor doesn’t provide a builders report it’s a red flag of “what are they trying to hide?”
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u/vixxienz The horns hold up my Halo 6h ago
a vendor obtained report has no legal standing for a buyer
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u/Esprit350 6h ago
Sounds sensible.... and the money you save on inspections can be spent doing the head gasket on your Rover 220 every nine months ;)
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u/Maori-Mega-Cricket 6h ago
Where the heck is being sold at auction, a busy one, in this housing market?
This sounds like something from 2021, not 2026
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u/SoulDancer_ 6h ago
Auctions are happening a lot
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u/crashbash2020 6h ago
the auctions are still happening, but not selling in my watchlisting experience. im looking in a in demand suburb and its maybe 15-20% actually selling at auction rather than going to PBN.
I think alot of REAs are just lazy and its an easy way to sell a property as it doesnt require really any back and forth. get the photos, get it listed, do a few open homes and shake a few hands while knowing nothing, then get (hopefully) a bid which is unconditional. they miss the boom times and try it on anyway
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u/cubenz 5h ago
So that's 15-20% being sold by auction then.
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u/crashbash2020 5h ago
yeah, and in comparison to pre2021 where it was probably more like 50%+, its a dramatic change
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u/last_somewhere 6h ago
Considering you have to do builders report and anything else you want before even turning up to an auction you may not win is hardly appealing.
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u/StandOk9112 6h ago
Agreed. Real estate agent told people that they were gonna be the only one at auction so people felt like it was zero risk to go.
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u/mahoganyspitfire 7h ago
There are massive industries and an entire class of 'Sorted' people who are extremely heavily invested in not doing things any better.
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u/StandOk9112 7h ago
That sucks but I'm afraid you're correct. It's just madness.
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u/mahoganyspitfire 7h ago
Yeah it is.
My only hope is that these people come to see the madness before things get populist revolutiony... And that's for THEIR sake because they're the ones who'll come off worst if they cause that.
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u/CodHopeful9064 7h ago
It is emotionally manipulative, but I feel less sick about it in a Buyers market, those people had every oppurtunity to walk away and find something better.
It's not like 2021 where society was telling you the home ownership window was closing, and people were bidding away their financial future on shitty town houses in south Auckland.
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u/StandOk9112 7h ago
Well it's tricky you see. Apparently the real estate agent was telling each person that no one else was bidding. So they all did their due diligence only to find out that there was competition on the day.
Too late to walk away then. But I agree with you; auctions should be boycotted.
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u/CodHopeful9064 7h ago
The craziest thing about buying a house is complete lack of understanding most people who buy them have of what they are buying.
The Process made me realise unless I was a Lawyer/Builder/Engineer there was going to be some amount of blind faith, in the biggest purchase of my life. Insane.
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u/Slight_Storm_4837 LASER KIWI 6h ago
Yes, we can all do better. I wouldn't be in my home if I didn't make a pre-auction offer.
I basically did my due diligence before anyone else could and scoped out a real estate agent who wanted quick sales instead of caring about the clients needs who convinced the client to take my offer (don't get me wrong I bought in 2020 I still paid too much money compared to today).
Long story short auctions only serve real estate agents who get a quick commission. It fucks over buys due to the effort required to not win and sellers who miss out on the under 20% deposit market.
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u/Pharomzz 5h ago
I didn't even consider auctions or even deadline sales when I brought my house, they are all just set up to make the buyer pay more.
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u/GrapplingHobbit 44m ago
I didn't even bother with houses that didn't have a price listed. Price by negotiation? NO SHIT,REALLY?? Thanks, for nothing.
Even though they showed up in my search that included top and bottom price filters, that's sort of meaningless since REA put arbitrary numbers in the hidden 'expected sale price' field just so they show up for people searching a lower price bracket, wasting everybody's time.
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u/StandOk9112 5h ago
Deadline isn't too bad, but auction is so wrong.
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u/Pharomzz 5h ago
I was lucky to buy in 2023 so I had the option to ignore them. You are right though auction is worse.
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u/keywardshane 5h ago
The number of auctions seems to be increasing locally, guess the realty agents think they can squeeze some blood from that stone
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u/Single-Malted 7h ago
It's simple, if you don't like Auctions don't attend them. Tell the agent to call you when it's on the market with a price.
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u/StandOk9112 7h ago
If only life was that simple. But yes, I won't be watching that Bloodsport again out of principle.
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u/OldKiwiGirl 7h ago
Well, it’s simple in that you don’t even look at a house that is going for auction.
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u/StandOk9112 7h ago
But it was different in this case. My friend was told that he was the only bidder attending. Turned out to be bs.
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u/qp_Tree_qp 7h ago
Can tell you the opposite can happen, and does often, where the only party vaguely interested can come up with a deal when the property is "passed through"
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u/smasm 7h ago
I've bid in a few auctions. I remember one in particular, going back and forth with another young-ish couple. After we'd battled it out (I can't even remember if it was us or them who won) an old dude stepped in and bid one increment above. I assume an investor.
I remember the realisation that the whole thing had been a done deal, and the other couple and we were only there to set the price for the investor, and neither of us ever had a shot.
Another lot of lawyer and inspection fees down the drain, along with hours and hours of checking and a whole lot of emotional load.
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u/StandOk9112 7h ago
See, this right here. Something is morally wrong. You were used as price market fodder to push an investor's max up. Such BS. There's no risk for sellers, only buyers. Sorry you went through that. It's shocking.
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u/crashbash2020 6h ago
in the past auctions were quite a big contributor to the rising prices.
today now IMO its not a good strategy unless your area/house is in huge demand.
most houses go passed in with zero bids, or zero real bids anyway (anywhere near a real price).
houses get their most interest in the first few weeks of listing. if you scare away a decent chunk of buyers who cant/wont participate in auctions (i refuse on principal, and i cant do unconditional as i need to sell to buy) you get less eyes on. sure you can put it on negotiation later, but im far less likely to see it, and if i see a property thats been up for 4+ weeks im assuming there isnt huge demand and Im more likely to negotiate harder.
seeing it go from auction to negotiation is like a public declaration the house isnt sought after, therefore i as a buyer can try push the price down more
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u/123felix 7h ago
All this hype just pushes prices up further and further
If it makes you feel any better, research from Macquarie University Sydney found that auction doesn't push the price higher.
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u/ScholarWise5127 6h ago
Auctions are an inefficient in aggregate. And if you win at auction, you often have paid too much:
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u/Ness-Uno 5h ago
There are better systems, even better auction systems. We just don't use them because most people aren't familiar with them. Introducing an unfamiliar system that people have never heard of makes people cautious, you get less people interested because they think it's a scam or can't be bothered learning a new system on top of the already massive pile of things they have to do.
At the end of the day all systems are a tradeoff of pros/cons. Auction is a system that favours the seller
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u/RuggeroCarmelo 4h ago
Auctions are by far the most fair and most transparent way to buy a house. Consider the alternatives. At an auction you can pay as little as 1k more than the next highest bidder. You know there’s real interest or no interest and exactly how much others are willing to pay.
With deadline sale you get told a price guide, then have to take a guess. You could be paying 100k more than the next person. There could be no one else. You can loose the house by 1k. The buying pool is far bigger too, since you don’t have to be unconditional.
In your dream world, you get a bargain when you buy a house. Consider what that even means. Why would no one else be interested in it? Will anyone be interested when you go to sell?
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u/fork_spoon_fork 7h ago
Sir this is how capitalism works.
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u/StandOk9112 7h ago
Well, I guess I'm no longer a capitalist 😂 but seriously. I respect genuine and ethical business. Auctions seem anything but. I'm not against clean competition. But what aI witnessed was pure explotation.
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u/Clean-Baker2399 7h ago
I may be missing something, but “ several people wanted the house and the person willing to pay the most bought it” doesn’t immediately strike me as an ethical crisis. I’ve bought and sold property at auction before and slept remarkably well afterwards. The vendor isn’t running a charitable housing allocation scheme. They’re selling what is probably one of their largest assets and, quite reasonably, would like to get the best price for it
The bit I always find curious is that people become terribly concerned about the morality of achieving the highest possible price right up until it’s their house being sold. Presumably when you eventually sell yours you’ll identify the most deserving first home buyer in the room, stop the auction and accept $200k less than the investor standing beside them was offering. If so, fair play. Please come back and let us know how that goes.
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u/lefrenchkiwi 6h ago
The issue with an auction isn’t the finding the highest price, it’s the unconditional nature requiring thousands spent in due diligence by every separate buyer in the room that goes to waste.
If auctions were conducted with the standard agreement being ‘subject to builders/engineers report’, people wouldn’t be wasting thousands of dollars just to be able to in the room.
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u/Clean-Baker2399 6h ago
That would give every winning bidder and blanket “out” to walk away. Back to square one. Auctions aren’t for everyone, but they work
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u/lefrenchkiwi 5h ago
Correct, because if you’re going to sell a falling down dump without disclosing it you deserve to lose out as a vendor.
Not only would it stop the buyer pool wasting money unnecessarily, but it would force vendors to be more honest about the house and disclose known issues to buyers could make an reasonable assessment on wether they want to bid. If you disclosed the issues and they bid anyway that’s on the buyer, if you didn’t and the builders report finds them afterwards making the buyer walk away, that’s on you.
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u/StandOk9112 6h ago
Nah bro. You can justify it as much as you want but I'd never expose people to this. It's greed imo. You're playing with people's lives.
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u/Clean-Baker2399 6h ago
“Greed” seems to be doing quite a lot of work here. Someone owns something, several people want it, and they sell it to whoever offers the most. You may not like it, but that doesn’t make it wrong
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u/MaidenMarewa 6h ago
I've watched some house auctions on YouTube and that stresses me. I've never bought a home from an auction and would never sell that way. If everyone refused to participate in auctions, another method would have to be used.
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u/phantomak 5h ago
I've attended 2 auctions so far and both had 0 bids and passed in. I was hoping to see some of the nonsense. But yeah, it's completely fucked.
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u/StrangeScout 4h ago
An auction will only reach slightly higher than what the second highest bidder was willing to pay... Not necessarily the best price
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u/UncyReddit 4h ago
i've never bought or sold at auction. Never even been to one. But I don't have a moral issue with them. the agent is engaged by and contracted to the vendor and it's their job to maximise the price.
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u/FendaIton 3h ago
Yes, and harcourts are absolute cunts. They have a rule where you need to bid twice to show you’re a real bidder. Like I’m at the auction you dumb fuck registered. It’s just a way to prop up bids.
Ray white, harcourts etc are the biggest frauds out there. They are the real reason our housing is fucked. The emotional manipulation in bidding should be illegal. Cramming everyone into a tiny room where you stare down other bidders should be illegal.
In Norway the REA is also a lawyer, and we went to an auction in Norway and all the bidders were added to a group chat and we bid over a few days.
The entire REA industry needs overhauling. Don’t even get me started on their insane fees.
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u/newaccount252 2h ago
I was a first time buyer who went to auction to bid on a property.
I did fuck all due diligence and trusted their building report (idiot I know)
Bidding started and I set my limit, bidding away. Hit limit. I stopped and said no more.
It didn’t sell straight away to the other bidder and went to the negotiation table, I left immediately and thought fuck it I’m out.
The selling agent then called asking where I had gone and I said iv gone I’m not interested and she was begging me to come back, then started saying if I went up $5k she would pay me back $3k and cover legal fees. I didn’t budge. Said good bye. 3 more phone calls later trying to get me to re bid, it all felt very predatory. In the end I asked her if what she was doing was ethical and she stopped harassing me.
I then saw her at a few other open homes and she blanked me.
All I hope is she lost a shit load of commission somehow because I didn’t buy.
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u/_chad_thundercock___ 6h ago
You’re selling your house:
How do you choose to sell it and why? If there was the potential of making an extra $50k for yourself, would you take the opportunity?
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u/StandOk9112 6h ago
I would write a price tag and slap it on the house. Greed would tell me to chase that extra 50k, but nope, I'd be happy with the asking price.
I just couldn't be okay with wasting tithe time, money, and energy of buyers. The stress, the worry. I couldn't do it. And if that costs me 50k then I'd proudly forgo it.
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u/_chad_thundercock___ 6h ago
That’s nice to think that. But if your price is too high and you get no one through? What if your price is too low and you sell it super quick, leaving yourself wondering what you could’ve earned..
Let’s say you get a few different people make an offer. One is below asking, one is at the asking and one is $50k above asking. Are you telling me you won’t take the extra $50k?
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u/StandOk9112 6h ago
Of course I'd take 50k, as long it's not dinevia emotional manipulation via auction.
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u/_chad_thundercock___ 6h ago
But three offers have just been made at the same time. Everyone really should be putting their best offer forward. So they’ve all been emotionally manipulated to make the best offer they can to try and secure your property.
There’s no way around “emotional manipulation” when it comes to selling something. If more than one person wants it, they’re going to compete for it. I don’t believe that you would stand on the moral high ground if you sold a property. You’d want as much as you can get one way or another
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u/StandOk9112 6h ago
I wouldn't have these people competing in an auction under emotional and time constraints.
It would have to be free for them to make offers. Due diligence later.
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u/_chad_thundercock___ 5h ago
Fair enough. So really your distaste for an auction is more about your own ethical standpoint as opposed to greed.
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u/StandOk9112 5h ago
It's about the losing bidders being used as a means to an end.
The bidders all have to spend their time, money and energy preparing for an auction. A time limit for due diligence is arbitrarily set to create artificial pressure.
Some of these people have spent months saving up to pay for lawyers and inspections. And then, they are all pushed into a room to compete against each other.
Once the hammer falls, there is only one winner. The vendor gets paid, the real estate agent gets paid, but all these other bidders go home with less than zero.
That's the part I'm against. There's no respect. If it wasn't for the bidders, the sale price would have tanked. The bidders are used and then discarded. The vendor, profits along with the real estate agent. It's just wrong.
I hope that makes sense.
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u/BaanThai pie 6h ago edited 5h ago
I bought my first home in an auction, and I would do it again for the right place. I see it as one of the few times you can play the players. Emotions run high but if you can keep cool and collected, they have no power. Watch a few live auctions from their office and you'll see how lazy and predictable they can be.
edit for anyone going through the process (better luck next time OP!):
Find livestreams of auctions by the big agencies (or just the ones you are interested in) and watch. The livestreams can go on for hours, multiple times a week. Learn how the auctioneers talk, how people bid on properties you're going for too and the general language being thrown around.
If you decide to go to auction and you know who will be the auctioneer for your property, watch them especially. They can be fairly predictable and you will notice how they handle incoming bids, whether they "suggest" bids from specific people in the room, if they become aggressive with increments or how long they allow before actually bringing the hammer down. Some will painfully stretch it out if they can't confirm there's only 1 possible bidder left, so if it goes on the market and people are bidding you can wait until the last second and sweep them off their feet.
90% of the live auction speech is bravado and they will try their hardest to emotionally trap you, but it's there to overwhelm you and cloud the real auctioneering. If they have a TV display with the price, focus on that as it will become the only grounding fact in the whole charade. You might get lucky and have a leech who "dropped by to help their colleague" suddenly appear after a random introduction. They will start distracting you by manipulating your partner (who you both agreed would let you do the bidding) when you needed concentration and space the most. Ignore anyone that approaches you during the proceedings. They don't exist and only serve to interfere and distract.
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u/StandOk9112 6h ago
But what about all the people who lose their money? Also, these other bidders make the vendor richer but receive no reimbursement? Doesn't seem right.
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u/phantomak 5h ago
I honestly stared at the auctioneer with thoughts like "who are you that you can do this, say these things, spout this bs... And feel ok about yourself?" I was aghast. It feels like I'm watching a piece of theatre
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u/JamesWebbST 5h ago
Auctions is just a mechanism for selling. There's no inherent good or evil about it. Why do you insist on being infantilised. Either bid or don't, no one forces you to do anything and it's not your house - the vendor can choose to sell as they please.
Just because it makes you nervous being in an auction room i.e. you can't handle it, doesn't mean the process is inherently flawed.
So the question is, can you be an adult?
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u/StandOk9112 5h ago
It's evil inherently. Based on greed. Shitting on other people clamouring for the prize.
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u/JamesWebbST 5h ago
No, its just a process buddy. Houses are not something you can buy off the shelf so for items with no benchmark value, leaving it for people to decide is normal. Grow up.
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u/StandOk9112 5h ago
Asking price is better. Processes can be immoral. I'd support auctions that were free to enter. And due diligence after. That would keep sellers very honest.
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u/JamesWebbST 5h ago
Auctions are free to enter. Presume you're not against Trademe auctions cause the lower stakes keeps your blood pressure lower. You're emotional. Keep in mind that the DD each buyer does is relevant only to their situation, so it's not one size fits all.
Asking price is not better. It's generally less efficient. If willing buyers and willing sellers agree on a process, and you feel excluded, thats a you problem.
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u/StandOk9112 5h ago
They are not free. Gosh sounds like you need to do due diligence. Asking price is fairer.
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u/JamesWebbST 5h ago
No, its not. If the adults in the room decide it's an agreed way to sell, which looks like it was sold, then the problem is you.
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u/Suitable-Ostrich1226 7h ago
I just didn't even consider a house if it was by auction, not worth the effort involved