oc | Thursday 23rd January

Commentary and Case Study with Glen Coutinho from Hocking Stuart

raw_Boardroom Auctions

raw_Glen CourtinhoThe Boardroom Auction is back on the agenda. There are traps, pitfalls and strategies required with a boardroom auction. However, in many ways, a properly conducted boardroom auction is a transparent way to conduct business. The jury seems to be out on whether or not a boardroom auction is covered by the auction legislation – meaning different selling agents do have different opinions. It seems black and white to us and the REIV has issued memorandums on the subject, but many selling agents are still unclear when the 2003 Dummy Bidding Government Rules apply.

Traps for buyers:

  • A boardroom auction called without a reserve or acceptable offer.
  • Not understanding the pressures involved in a boardroom auction.
  • Not being clear on process – the rules.
  • Intimidatory tactics from agents (deliberate and inadvertent – this is becoming rarer).
  • Not being ready in time.
  • Not having a clear mind on your limits.
  • Not even knowing it was on and seeing your dream property sold without reference to you.
  • Paperwork.

Strategies

  • Preparation.
  • Plan.
  • Process.

We have dealt with these agencies below and found their boardroom auction behaviour credible and transparent. The agents/principals named in brackets are people we have seen display consistent elements of credibility and we have a solid dose of trust in what they say. So, if you have doubts, don’t wish to get buyer representation and need to check the legitimacy of what is happening, then contact the principals/selling agents mentioned to check the rules. Note that we’re not saying to ask them for advice re money or whether it is right for you – they are working for the seller. Just ask these selling agents to confirm the process is fair dinkum and not a sham. We prefer all responses in writing with a signature.

Over the years, we have found a number of boardroom auctions / expressions of interest to be less than straightforward. Some commentators suggest that you contact the REIV or Consumer Affairs or whoever if you find that is the case. But how is that going to help you? The deal is done and you have either paid an uninformed amount or you are out of the picture.

If you smell a rat, are scared or unclear, you really do need to consider getting experienced representation. In fact, you should consider representation even if the auction seems ridgy-didge. Boardroom auctions – the large majority of which are legitimate – are still about preparation, homework and strategy; that is, they are if you wish to maximise your chances of making the right decision under pressure.

Case Study – 25 Clive Road Hawthorn East – sold in a boardroom auction in April.
Interview with Glen Cortinho, Director, Hocking Stuart Hawthorn.

Kris: Thank you for your time Glen. Why did 25 Clive Road, Hawthorn East end up as a boardroom auction?
Glen: My pleasure Kristen. Good to see you again. Here are the reasons:

  • The owners were away and didn’t want to go through opens on their return.
  • The objective was to test the market and see if we could get a satisfactory offer before running the full campaign.
  • 30 people turned up at the first open. This was a slight surprise as it was advertised on the Internet only.
  • Based on that inspection, we knew the property would sell well, as there were four interested parties that we assessed were willing to offer more than what we thought the reserve would be.
  • The highest expressions were around $1.6 million, which then became the acceptable vendor reserve.
  • By Wednesday, we had received two expressions at $1.7 million.

Kris: What was the process from there, Glen?
Glen:

  • The paperwork was then sent out to all interested parties with an advice that the property would be auctioned at 5.30pm on Thursday.
  • On Thursday, we confirmed instructions with the vendor and all buyers that we knew of were phoned and advised of the process. We advised:
  1. where the auction would be held.
  2. when.
  3. that buyers would need to have had legal advice, as there would be no cooling-off period.
  4. all parties were told that $1.7 million had been offered and accepted, unless a higher bid was made.
  5. that they needed to have a 10 per cent deposit.

Kris: What happened on the day?
Glen:

  • Four parties turn up and bidding was opened at $1.7 million.
  • It was announced that the property was on the market.
  • It was  sold in ones and fives at $1,754,000.
  • Two bid and two watched.

Kris: If you could put your buyer’s hat on, what do you think of boardroom auctions?

Glen: Positives:

  • Transparent
  • Private
  • Minimal peer group pressure
  • Over and done with – if you are going to get rolled
  • Small numbers

Negatives:

  • Can be intimidating with face-to-face opposition. If you feel this way, you should consider having representation.

Kris: What things do you need to make sure of before you attend a boardroom auction?

Glen:

  1. That the are reviewed.
  2. Need to be sure that an acceptable offer has already been offered.
  3. Need to have acceptable offer confirmed by auctioneer at start of the auction.
  4. Need to know that the agent has got instructions to sell then – ie the vendors can sign.
  5. Need to know your limitations.

Kris:  Dummy bidding at boardroom auctions – your thoughts?
Glen:  Agents would be in breach of laws. I’m not prepared to jeopardise my licence.

Kris: Any other thoughts?
Glen:

  • If you are a buyer you must tell the agent that you are interested in the property, otherwise you won’t know a boardroom auction is even on.
  • Talk to the agent and, if the agent is not helping you, perhaps go and see the principal and, if that doesn’t work, perhaps see a buyer’s advocate.
  • If this is all new to you, then you really should consider appointing an advocate.
  • My preference is to do an auction on the street because of publicity and atmosphere. The reason we do it in a boardroom is because we are forced to by a buyer offering pre-auction.
  • You can’t do boardroom auctions by phone. That is wrong, in my opinion.
  • Even if it’s sounding a bit shonky, you still have to work with that agent. But you should get representation.
  • It’s no longer about squeezing buyers, because we have an offer a vendor will take. It’s about being fair to all buyers. Sounds a bit corny, but that is up to you to believe or not.

Kris: Glen, thank you for your time. If you are a seller wishing to get an opinion of value and sell your home in the /Hawthorn area, you could do worse than talk to Glen. His contact details are 0409 779 399 or email gcoutinho@hockingstuart.com.au

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