I recently heard about something that happened at auction that made me very mad indeed. 

You see, I learned that a vendor had asked a couple of their friends to bid at an auction interstate.

Clearly, the vendor wasn’t that bright, because the agent said it was relatively simple to work out what was going on early in the auction.

As soon as they realised, the property was passed in and the vendors were left to deal with the calamity they had created for themselves. 

You see, not only is it illegal, but it was also stupid because the agent told me that the auction had a large number of registered bidders who were ready to buy on the day. 

Part of my anger was the illegal nature of what the vendors had attempted, but part of it was the fact that they also obviously didn’t respect the professionals who had worked so hard to sell their property. 

Trust issues 

That is why I believe the number one mistake vendors make when selling by auction is not trusting the agent to do their job. 

While the example above is an extreme one, it does highlight that these vendors didn’t think that their property would sell – even though the number of bidders there showed the agent had done an excellent job during the campaign. 

The more common way that vendors don’t trust agents is when it comes time to set the reserve price on auction day. 

Their agent would have given them feedback from buyers throughout the campaign, including the most likely selling price. 

However, even though vendors have paid for marketing and have had to open their properties for a number of inspections, they still choose to set an unrealistic reserve.   

Now, I’m not saying that vendors shouldn’t set an optimistic reserve price. 

Everyone is entitled to set whatever price they want, but there is no point setting one that has no bearing to market reality. 

Let’s say the feedback from buyers was $800,000 to $900,000 for a property. 

However, the vendor opts to set the reserve at $1.1 million, because they have a “gut feeling” or perhaps that is the price they “need” so they can buy their next home. 

The thing is, regardless of their own needs or wants, that price is unlikely to be achieved because not one buyer is anywhere near that figure. 

What is really annoying about this when it happens is that agents have often run successful campaigns, which have included 20 or 30 inspections and multiple offers, as well as given diligent feedback on price. 

Yet, the seller chooses to completely disregard all of this, so effectively they’re saying to the agent that their work for the past four weeks was for nothing. 

As well as being offensive, it is illogical because a property that is priced correctly will usually result in the reserve being passed under auction conditions. 

That, in turn, will mean that buyers know they’re playing for keeps, which drums up emotion and competition and ultimately drives the price higher.  

Today’s price 

I’ve always thought that real estate is funny because when you sell shares, for example, with a stockbroker on a specific day they may say that you will get $1.50 per share.

It might be less than what you paid, but if you want to sell that day that is the price that you will receive. 

However, when it is property, the agent will tell the vendor that it is likely to sell for a certain price on auction day. 

However, the vendor simply doesn’t believe them, and opts to set an unrealistic reserve price that they never had any hope of achieving. 

At the end of the auction day, the market price is the one that a buyer is prepared to pay at that moment in time, which vendors either choose to accept or they don’t.  

The smartest vendors opt to work collaboratively with the professionals they have hired to help them achieve their goals – not vainly believe that they know better.

More from this contributor:

Why perception is never market reality 

Brisbane auction market comes of age

Why an auctioneer is like a drummer in a band