Sunday, December 16, 2012

House auctions

There was a house auction in the neighborhood yesterday, so we stayed and watched.

There were about 10 families there, but when the auctioneer started the bidding, only one family was willing to bid. They started a bit low; the auctioneer eventually called a "Vendor" bid, which is to say he bid over them by $20K on the seller's behalf. They've always had plants in the audience raising the bidding, but these days they have to identify themselves instead of pretending to be genuinely interested parties. The original bidder finally made a second bid. The auctioneer outright said he was disappointed, and made another vendor bid. Then he passed the house in - that is, declined to sell

I can't imagine buying a house this way; not only am I unwilling to walk around with 10% of the purchase price in my pocket, on the off chance that I win an auction, but the deal is final: you need to have already hired a house inspector and made your inspection, because whatever state the house is in, you are stuck with. This is crazy; before I can even find out how much a house costs (because they never tell you beforehand) I have to make a full inspection? Why not find out if the seller and I can even hope to reach an agreement before we start spending money on inspections?

Immediately after the auction was over, a different family signaled the auctioneer and went inside to make an offer. The original bidder did the same. At that point it was just like an American house sale, with interested parties making offers and the seller making counter-offers. I'm not sure how final the deal was, but I imagine you could make your offer conditional on the house not having any major undisclosed flaws.

I've talked to several Aussies about this, and they all have the same take: suppose you're selling your house and somebody really falls in love with it. You could have a bidding war and the sky's the limit! Except, how ridiculous is that? People don't suddenly decide to spend an extra $50K on a house because they're impulsive. Who has that kind of money? And even if they did, the entire auction system - wherein the seller is hoping to sell for far more than the house is worth, and the buyer is hoping to find someone so desperate that they'll sell for far less - is just distasteful. It's an arrangement where both parties are hoping to screw over the other one. That's never a good business model.

The American method seems to be growing; only about half of houses go to auction these days, and half of those get passed in (to eventually be sold through ordinary wheel-and-dealing, I guess). More and more houses are listed in the ads with actual prices, so you know if it's in your range or not. This is one part of American culture I won't mind seeing displant the local flora.

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