Non-traditional auctions too risky: CEO

Non-traditional auctions too risky: CEO

12 November 2013 by Staff Reporter 1 comments

Brendan Wong and Stacey Moseley

‘Non-traditional’ auction methods are perilous and only serve to confuse potential homebuyers, according to a prominent network CEO.

Speaking exclusively to Real Estate Business, managing director of RE/MAX Australia Michael Davoren said methods such as reverse auctions and no-reserve auctions carried many risks.

“The main one is you confuse the public. They hear the term ‘reverse auctions’ and various gimmicky things, and most real estate agents don’t understand [that it is confusing]. That’s not the answer to getting an advantage in a very competitive market," he said.

“It’s about trying to understand better the different segments of the marketplace – where are the buyers coming from? What is it they need? and really specialising in trying to infiltrate those sectors of the market.

“The fact we’ve got people who run to the edge of being a little bit risqué in advertising and those sorts of things cheapens the industry. I don’t think we need to do that in our industry. I think we need to understand the marketplace and what the needs are.”

Last week, Real Estate Business reported that Ray White Whitsundays was auctioning a waterfront bungalow without a reserve price.

Marketing agent Steve Marks said the reason behind the method was due to the fact there were no pre-sales to base a price upon.

Mr Davoren said he had seen no-reserve auctions that worked, but agents who conducted them needed to be aware of the legal ramifications.

“A no-reserve auction needs to be a no-reserve auction. There can be no vendor bidding or bidding on behalf of the vendor, so there really is a risk to it. Sometimes it works, sometimes it doesn’t," he said.

“I wouldn’t personally advise anyone to do that. I think real estate is too serious a business to do that. If somebody wanted to go down that track, they need to make sure they understand the ramifications of it - and that might be enough to make them consider the more traditional auction method.

“I think, even more importantly, they need to understand that if they were going to go down the auction road, they need to ensure the person who is operating the auction marketing campaign really knows what they’re doing, and if they do, it will work.”

Similarly, Mr Davoren said anyone who wanted to go down the route of a reverse auction, such as that which occurred successfully in Queensland, needed to understand the risk.

“Most buyers don’t understand it, so they’re going to avoid it. I’m a firm believer in the traditional auction, and I don’t think changing the rules is going to make it better. It’s more risky and more people will miss out. The legal part of the real estate industry hasn’t kicked in with it yet, so the rules and regulations might not be as relevant or clean cut," he said.

Brendan Wong and Stacey Moseley

‘Non-traditional’ auction methods are perilous and only serve to confuse potential homebuyers, according to a prominent network CEO.

Speaking exclusively to Real Estate Business, managing director of RE/MAX Australia Michael Davoren said methods such as reverse auctions and no-reserve auctions carried many risks.

“The main one is you confuse the public. They hear the term ‘reverse auctions’ and various gimmicky things, and most real estate agents don’t understand [that it is confusing]. That’s not the answer to getting an advantage in a very competitive market," he said.

“It’s about trying to understand better the different segments of the marketplace – where are the buyers coming from? What is it they need? and really specialising in trying to infiltrate those sectors of the market.

“The fact we’ve got people who run to the edge of being a little bit risqué in advertising and those sorts of things cheapens the industry. I don’t think we need to do that in our industry. I think we need to understand the marketplace and what the needs are.”

Last week, Real Estate Business reported that Ray White Whitsundays was auctioning a waterfront bungalow without a reserve price.

Marketing agent Steve Marks said the reason behind the method was due to the fact there were no pre-sales to base a price upon.

Mr Davoren said he had seen no-reserve auctions that worked, but agents who conducted them needed to be aware of the legal ramifications.

“A no-reserve auction needs to be a no-reserve auction. There can be no vendor bidding or bidding on behalf of the vendor, so there really is a risk to it. Sometimes it works, sometimes it doesn’t," he said.

“I wouldn’t personally advise anyone to do that. I think real estate is too serious a business to do that. If somebody wanted to go down that track, they need to make sure they understand the ramifications of it - and that might be enough to make them consider the more traditional auction method.

“I think, even more importantly, they need to understand that if they were going to go down the auction road, they need to ensure the person who is operating the auction marketing campaign really knows what they’re doing, and if they do, it will work.”

Similarly, Mr Davoren said anyone who wanted to go down the route of a reverse auction, such as that which occurred successfully in Queensland, needed to understand the risk.

“Most buyers don’t understand it, so they’re going to avoid it. I’m a firm believer in the traditional auction, and I don’t think changing the rules is going to make it better. It’s more risky and more people will miss out. The legal part of the real estate industry hasn’t kicked in with it yet, so the rules and regulations might not be as relevant or clean cut," he said.

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