Inaccurate guide prices.. what's the point?

se2020

So I was watching a property auction today, 
The guide price was £350-375k.
Bidding went up to £424k and the auction ended as unsold as the reserve had not been met. 

I know the agents might show a lower guide price than what the expect it to sell for to drum up interest but even if the reserve was set at £425k it's still £50k over the top end of the guide price and I would think buyers with an extra £50k to spend might be looking at higher priced houses to start with? 
I also know the guide price is just that, a guide, but surely the reserve must be known to the agents therefore is it not false advertising to knowingly advertise it at a price which is below the acceptable sales price?

Also, the end time of the auction extends by 1 minute if somebody places a late bid.
11 of the 14 bids placed were all done in the 'last' 10 seconds or so of the auction. What's the point in bidders doing that? Do they think it is ebay or something?

AdrianC

The guidelines say reserve should be <110% of guide. So guide of £375k + 10% should be no more than £412.5k.
It isn't "false advertising", because the guide isn't "advertising it at a price".

The "+1 minute" bit... Is this a proper auction or "modern method"?

davidmcn

se2020 said:

Also, the end time of the auction extends by 1 minute if somebody places a late bid.
11 of the 14 bids placed were all done in the 'last' 10 seconds or so of the auction. What's the point in bidders doing that? Do they think it is ebay or something?

I've only ever seen the "auction extending by 1 minute after a bid" on the even-dodgier-than-ebay auction websites aimed at the gullible, never at a property auction (which I would expect to continue in the conventional way i.e. until the bids stop going up). What is this auction?

Grumpy_chap

The guide price is just that and, sometimes, a property is difficult to value, so the guide is set low to generate interest. 

There was a parking space near me sold recently with a "guide" price of £5k that eventually closed at £16k.  The only way to get the true value for an item like this is to generate interest and then let it max out.

A derelict garage and parking lot at Christmas started at £90k guide and closed at £132k.

With the online auctions, the extending time is the way to get the most out of the market, but they normally do more than just extend by 1 minute.  If you bid, then there is a higher bid, the auctioneer will make contact back with you and enquire whether you intend to make a higher bid.  Based on your response, they can then extend by longer than just 1 minute or 1 hour.  So, if you have 'topped out' your available funds but say you may be able to secure sufficient to make a higher bid in, say 24 hours, the auction can be extended to allow that opportunity or not.  It can result in an auction duration running into days.  All part of the reasonable actions of the auctioneer to generate the best outcome for the vendor and the auction house.

se2020

This is a mainstream estate agent that hold regular sales room auctions, the last 2 auctions they have had have been online due to corona.
I have seen it before and understand why the auctioneer would extend the end time online,  much equivalent to waiting to see if there are any more bids before the hammer in a real auction room. What I don't see is why bidders just wait until the last few seconds to bid when they know the bidding time will just get extended?

I also understand the guide price can not be accurate and the auction  may end up well over that but wh suggest a guide price that is at least £50-75k lower than the reserve?

Grumpy_chap

OK, so I think my house is worth £110k and set £100k as the reserve price (absolute minimum I will sell for).
The auctioneer thinks it is worth £50k and sets that as the guide price to get as much interest as possible.
Bidding closes at £96k, so the auctioneer can still make an after-sale introduction and I might just take it.  If the bidding had been set to start at £100k, likely the £96k would never have been solicited.

se2020

Grumpy_chap said:

OK, so I think my house is worth £110k and set £100k as the reserve price (absolute minimum I will sell for).
The auctioneer thinks it is worth £50k and sets that as the guide price to get as much interest as possible.
Bidding closes at £96k, so the auctioneer can still make an after-sale introduction and I might just take it.  If the bidding had been set to start at £100k, likely the £96k would never have been solicited.

So if I am looking to buy a house and have a absolute max budget of 80k the guide price is going to get my interest but it is a complete waste of my time registering for the auction pack, downloading all the documents, driving round for a viewing etc only to find out when the auction actually opens for bidding that my bid of 80k does not meet the reserve.

Or, on the other foot, if my absolute max budget is £125k and they are advertising your house on rightmove with a £45-55k guide price it might be perfect for me and I might be prepared to pay you £125k for it but I would never see it as I am searching for houses between £100-£135k.

eddddy

se2020 said:

So I was watching a property auction today, 
The guide price was £350-375k.
Bidding went up to £424k and the auction ended as unsold as the reserve had not been met. 

If that's correct, that would mean that the auctioneers were breaching an ASA ruling.

If the guide price is expressed as a range (like £350k to £375k) the reserve price must fall within that range.

A ruling in 2014 by the ASA stated that where the guide price is a range of figures (for example £100,000 to £110,000) then the reserve must sit within that range, and where the guide is a single figure (for example £100,000 or £100,000+) then the reserve must be within 10% of that figure. The reserve however is only the figure at which the auctioneer by the vendor is authorized to sell the property on the day.

link: https://www.eigpropertyauctions.co.uk/buying-at-auction/guide-prices-explained

So you could make a complaint to the ASA, if you wish.

Scotbot

I have watched online auctions where there is a stated end time. In practice if people are bidding it is extended until they stop, this is no different from people bidding at an auction house. I imagine this is included in the terms and conditions. Can't remember whether they were the 'modern method'. Whilst these are IMO a legal scam to raise fees the practice of waiting for the last bid was the same as the traditional method. The extensions were real time until no more bids were received, minutes not hours.