How savvy home buyers save thousands of dollars.

Last weekend (September 14, 2024), more than 2,300 homeowners offered their homes for sale by auction.

Let’s re-phrase that opening statement:

Last weekend more than 2,300 homeowners got ripped-off.

And yes, of course, I can prove it.

Indeed, in my book 88 Reasons Why You Must Never Sell Your Home at Auction, I challenge any well-known auction agent to debate me on this point. No agent has accepted.

All auction sellers get ripped off. Essentially, there are two ways sellers get stung at auction.

First, they pay far too much in needless expenses.

Second, most home sellers under-sell their homes at auction.

All this – and more – is revealed in the book, 88 Reasons Why You Must Never Sell Your Home at Auction.

But if auction is the worst way to sell a home, the opposite is surely true: Auctions are the best way to buy a home. Yes, often that’s true.

HOW BUYERS PAY LESS AT AUCTIONS.

Here’s the reason most buyers pay less at auctions than they would otherwise have paid.

At a public auction, each buyer sees what other buyers are offering. Therefore, instead of having to offer their highest price, all the buyers have to do is offer slightly more than the previous bid.

At auctions, every buyer has a pre-determined highest price. And, of course, every seller has a pre-determined lowest price (known as “the reserve”).

But here’s one of the big reasons that auctions are usually good for buyers and always bad for sellers: Under the rules of auction, sellers are forced to reveal their lowest price. But buyers are never forced to reveal their highest price.

This is like having a game of cards where one person is forced to show their cards, but their opponents keep their hands confidential. It’s nuts, right?

But that’s public real estate auctions. A terrible way to sell; a great way to buy.

EXAMPLE OF WHAT CONSTANTLY HAPPENS.

Let’s say a home is for sale in a prestige suburb.

The owners have set a reserve price of, say, $5 million.

The agent has done what most agents do – attracted a few buyers (most of whom have been lured by a misleading low price).

But one buyer in the crowd has fallen in love with the home. This is the home they have been searching for. It’s their dream home. They want it at all costs.

This scenario is common at auctions – especially much loved and much desired homes.

The buyer who’s in love with the home realises it’s worth around $5 million – despite the agent implying it may sell for less. And the buyer is willing to pay up to $6 million.

The bidding opens at $4 million.

Several bidders push the price up (That’s part of the mirage, the price going up – yes, because it starts low!). When the bidding reaches $4.8 million, only two bidders remain.

The first buyer’s limit (as mentioned) is $6 million.

But the other buyer has a limit of $5 million. It’s this buyer’s turn to bid – so they bid $4.9 million.

The first buyer now bids – how much? A hundred thousand dollars more.

The bidding stops at $5 million. The other buyer can’t go higher.

And so, the auctioneer (with a big grin at having reached the sellers’ lowest price – the reserve) – announces that the home “will be sold”.

With no further bidding, the home is sold for $5 million.

The auctioneer then encourages the crowd to clap.

The sellers are smiling because they “got their price” – $5 million.

But the sellers wouldn’t be smiling if they realised that the buyers were willing to pay a million dollars more.

The buyers are ecstatic. They just bought a home for $1 million less than they were willing to pay. Like winning the lottery without having to buy a ticket.

JACK AND SUSANNA.

The above example is what happens at the weekend at most auctions. Most buyers, of course, would not have bought for a million dollars less.

Some – wait for it – save even more.

A few weeks ago, Jack and Susanna sold their home in the south (by private negotiation). Had they sold by auction, they would have short-sold by $250,000 (the difference between the highest offer and the second highest).

On the weekend, they bought a home in Sydney at a public auction for $15 million. Their maximum price was $16.5 million.

Jack and Susanna paid $1.5 million less than they were willing to pay. Given that they sold their former home for $250,000 more, they were, in total, $1.75 million better off.

Because – unlike most real estate consumers – Jack and Susanna knew what they were doing.

It’s incredible when you think about it (which most consumers don’t; they just swallow the nonsense fed by stupid or crooked agents) – home sellers can lose more money selling their homes than they can earn in a year.

And never realise it.

The seller who got $5 million in the earlier example never knew that the buyers were prepared to pay a million dollars more.

And the sellers who sold at auction for $15 million never knew that the buyers were prepared to pay $1.5 million more. The agents were both chest-thumping “celebrity agents”. Like most agents, their main concern is what’s best for themselves not what’s best for the people who pay their commission – the ripped-off sellers.

KAITLYN AND JASON.

Kaitlyn and Jason are at the lower point of the real estate ladder. They had been searching for their first home for almost four months. They were avoiding auctions because they believed the great myth that auction prices are too high. But that’s only because most agents under-quote the likely selling prices.

However, Jason took time to do some research. He read the book with the 88 reasons that sellers should never sell at auction. To his delight, the book included a section called ‘7 Reasons to Buy at Auction’.

Last week, Kaitlyn and Jason finally bought their first home – at auction.

They paid $785,000.

Their maximum price was $850,000.

Therefore, they paid $65,000 less than they were willing to pay. That was more than they had been saving each year – on joint wages. Yes, they were happy – from the heart and the wallet.

Some buyers feel sorry for sellers after an auction. Especially when the sellers look happy. They may have sold above their reserve price; but, like most sellers, they did not sell for the highest price the buyers were willing to pay. They never knew how much they missed out on receiving.

THE MEANING OF “SUCCESS”.

Any agent who claims that “public auction is the best way to sell a home” is either a liar or a fool. There can be no other reason for pushing such a deeply flawed system.

As for “success”, agents take delight in describing auctions as “successful”.

But the word success for agents is not the same as success for their clients, the home sellers.

Take the “clearance rates” as a classic case of perpetual fraud.

Every week, the industry releases fake figures. Consumers en-masse are given “success rates” that are deliberately falsified.

This brazen fraud happens every week; it’s been happening for years.

Last week for example, there were 2,330 homes listed for auction.

Of these 961 sold.

According to the publicly released figures, 961 sales from 2,330 auctions represents a clearance rate of 62 per cent.

Only in real estate can a 60 per cent failure rate be described as a 60 per cent success rate. If such manipulation happened in the stock market, the guilty would be gaoled. In real estate the guilty drive flash cars and describe themselves as legends.

As the world’s most dishonest and disgusting real estate person (an American who shouts about eating dogs and cats) would tell us: “In every deal there is a winner and a loser.”

At real estate auctions, the only sure winners are agents. The sellers always lose – the only factor is how much.

And the buyers?

Well, as you have seen – and as you will discover if you do basic research – buyers can buy real estate at auction for less than they are willing to pay.

Often much less.

So, the message is simple: As long as the real estate industry – and its legion of crooks – seeks to rig the selling methods to suit itself, the only hope that sellers and buyers can have is to learn the system.

And learn how to beat agents – by selling for the highest price and buying for the lowest price.

Seriously, a few hours – days at the most – of diligent research can earn you more when you sell and buy real estate than you’d earn in a year or more of working.

If you doubt it, please try it. Do the research. For your sake. And your family’s sake.

Good luck.
By Neil Jenman