Auctioneers flout "pass-in" Laws

With the advent of lower clearance rates, we are seeing more auctions ending in a pass in. A “pass in” occurs when the bidding at an auction does not reach the vendor’s reserve and, as such, the auctioneer having failed to illicit a high enough bid, passes the property in and according to the rules of the auction, must negotiate with the highest bidder first.

If you have been to many auctions, you will probably have heard the auctioneer open up the auction with a “vendor bid”. This is a bid, made by the auctioneer, on behalf of the vendor, quite often, to kick things off and get the bidding started. But it is sometimes used by auctioneers to advance the bidding if they have only one bidder. In other words, a bidder from the crowd bids $600,000 and nobody else says anything, so the auctioneer will bid $650,000 “Vendor Bid” and then ask the original bidder to go over the top.

Now the auctioneer will say things like, only the top bidder gets the lawful right of first negotiation and as the Vendor Bid is the highest, then nobody has this right. This is totally incorrect and a total lie. The highest “real bid” from the audience does have the first right to negotiate with the vendor.

In both 2012 and again in 2016 the Real Estate Institute of Victoria analysed the rules and publicly acknowledged that if a genuine bid had been made, that no vendor bid could be used to remove the right to first negotiation.

Consumer Affairs Victoria have also addressed this exact situation and on their website has said that the highest bidder has the first right too negotiate with the vendor. This includes if the property is passed in on a vendor bid!!! https://www.consumer.vic.gov.au/housing/buying-and-selling-property/selling-property/selling-property-by-auction

So, if you are bidding on Saturday and you have the highest bid, and the auctioneer tries to remove your right of first negotiation by continually vendor bidding over you, call him out. If you are the highest “real” bid you do have the first right to negotiate ahead of anyone else.

If you are looking for a professional negotiator, please feel free to give our office a call.

Ian James
Director JPP Buyer Advocates

Reserve Bank freezes cash rate

After the 20th month of no change to the cash rate, we are now in a new era for the Reserve Bank. Since rates have been examined on a month to month basis, we have not gone this long unchanged. And with every major economic forecaster and the RBA Governor himself, predicting no change on the horizon, it will only be commercial forces within the banking sector that will cause in angst in the near future.

Locking in interest rates currently has little relevance except to the banks themselves. If they can cajole customers to fix rates it is simply to make sure they stay around and don’t change banks for a cheaper interest rate option, or face ridiculously harsh penalties to escape.

As our economy grows due to massive population growth, I predict we will see further competition in the banking sector for your home loan business. If you lock in your rate for even the shortest of times, the savings could well evaporate very quickly if you cannot take advantage of new options from other lenders.

When looking around at other options you should always try to maximise your potential borrowings. For example, if your property is worth $1m and you owe $300,000 then when checking for another home loan, you should look at asking for $500,000 and if approved, pay $200,000 straight back into the loan. This will give you a redraw facility under most lenders that makes it easier to access emergency funds or take advantage of purchasing an investment property easily.

As the property market is starting to level out, now is the time to see what your borrowing capacity is. Just remember there is good debt and bad debt. Borrowing money to purchase a growing asset can be the smartest decision you will ever make.

If you are considering buying or selling a property give us a call to have a free no obligation chat about how we can assist you.

Ian James
Director JPP Buyer Advocates