10 Myths of Real Estate Auctions – Myth 5

June 22, 2011

Myth 5 – The auction company places people in the crowd to bid for the seller.

This is one of my biggest pet peeves. It is called shill bidding and it is WRONG!

There is no need for this type of activity, and a reputable auction company will not plant bidders in the audience.

It is important to read the terms and conditions of the real estate auction to understand what type of bidding is allowed. If a property is being sold ‘subject to owner confirmation,’ and it is disclosed that the auction company can bid on behalf of the seller up to the reserve amount, then this is perfectly legal and acceptable. The key is full disclosure. In this case bidders know who they are bidding against and can make an informed decision as to whether or not they want to increase their own bid.

If the property is being sold without reserve, or absolute, there is no allowance for the auction company to bid on behalf of the seller. This is the purest form of an auction.

Sometimes there is phone bidding, online bidding or absentee bidding at a real estate auction. These bids will be handled by a staff member and it will be known that these are qualified buyers who have filled out the necessary paperwork and made the necessary deposit prior to auction day.

If you do business with a professional real estate auction company, there will be no shill bidding. It is important to examine a company and understand their ethical practices.

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