Departmental review of auction action in train

VENDOR, dummy or shill bidding at auctions has been put under the microscope as the Department of Consumer Protection and Employment examines the Auction Sales Act.

The contentious practice has been banned in New South Wales and Queensland and, pending the outcome of the review, to be announced next year, could be limited or even outlawed in WA.

Vendor bidding is when a person acting on behalf of the vendor bids at auction with the aim of driving the bidding price up to the vicinity of the property’s reserve price.

In the Auction Sales Act 1973 discussion paper, concerns were raised that the practice may inflate the sale price beyond the reserve price by overstating the true demand for the property.

The discussion paper also raised the point that, while the Real Estate Institute of WA sets out a code governing vendor bids, the practice is essentially unregulated and it would be difficult to prove an auctioneer has accepted un-authorised bids, due to the fast nature of the auction.

REIWA Codes of Conduct states the vendor or a person acting on their behalf may use only 10 bids to advance the bidding prices towards, but not including, the reserve price.

Suggestions in the discussion paper include having all potential bidders register, having any vendor bidders identified, or prohibiting the practice altogether.

REIWA vice-president Greg Rossen, of Rossen Real Estate, defended vendor bidding, saying it facilitated a greater likelihood of a sale taking place.

“This is a mechanism which allows the bids to be lifted from a level below market price to a locus where the vendor will consider selling,” Mr Rossen said.

“Purchasers often believe they have a right to buy the property, but they do not, it is the vendor who chooses to sell, at a price they are satisfied with.”

And having all potential bidders registered was a “short-sighted” suggestion that ignored reality, he said.

“Some purchasers may wish to remain anonymous ... they believe that their right to buy a property at fair market price would be disadvantaged if they were neighbours or perceived to be wealthy,” Mr Rossen said.

“And some purchasers may only inspect the property on the day of the auction and seeing the level of activity may, at the last minute, decide to enter the bidding.”

REIWA Auctioneering Chapter chairman Peter Lawrance pointed out that the Department of Consumer Protection and Employment had received no complaints regarding vendor bidding at property auctions.

However, REIWA would be pushing that its code of conduct become part of the reviewed legislation.

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