Hi, Sam Price here from Templeton Property and today I’d like to discuss – What is a Vendor Bid at an Auction?
As strange as it may sound, in Queensland, the auctioneer is allowed to bid on behalf of the vendor and is also allowed to accept bids from the seller or their representative. This is referred to as a ‘vendor bid’.
When the auctioneer chooses to do this, they must clearly announce to the attendees that it is a vendor bid and when you hear this, it tells you that the property has not yet reached the reserve price and therefore not yet on the market. This is because vendor bids are not allowed once the reserve price is reached.
I attended several auctions recently where the auctioneers used vendor bids. In both these particular auctions the bidding was slow and lack lustre and the auctioneer was trying to raise the price closer or to the vendor’s expectation and the reserve price. It also allows the the property to be ‘passed in’ at a figure greater than the highest bid on the day.
In Queensland, the auctioneer can place unlimited vendor bids, though it’s rare to see more 1 or 2 used at any one auction.
They are mainly used to:
- Create momentum at the start of a slow moving auction, when no one is confident to start the bidding;
- When the first bid is unrealistically low and the auctioneer is trying to move things along to a price closer to the reserve;
- To finish an auction that hasn’t met the reserve price and the agents wants to finish the auction with a ‘vendor bid’ that will be the passed in figure, which they can then provide as the starting figure for private treaty negotiations.
Although most buyers tend to be very suspicious of ‘vendor bids‘ , most auctioneers do announce prior to the auction that they could use them and also make it very obvious when they are making a vendor bid. So really, there is nothing to worry about them and just think of them as providing you with an indication of what the vendor is hoping to achieve for the property.