Outrage as house auctioned twice

Properties sold at auction in Melbourne may not go to the winning bidder after a real estate agent on Saturday sold a Burwood East home for more money after the hammer fell.

The auction exposed a legal grey area, sparked outrage among the crowd - and drew the promise of a probe by the Real Estate Institute of Victoria.

Hao Chen thought he had bought the home at 10 Aruma Court (pictured) after the auctioneer brought down his hammer and declared the property sold. But moments later - in front of a large and dismayed crowd - the auctioneer's boss allowed a late bid of $1000 more.

"(The auctioneer's) hand hit the piece of paper, the property was sold," said Martin Bona, a local resident at the auction.

Waverley City First National auctioneer David Makris said he had closed the auction before accepting the new bid at the behest of his boss, First National managing director Thomas Som.

Buyer's advocate Chris Koren, of Morrell & Koren, said the practice, while rare, undermined the integrity of the auction process.

"For want of a little bit more money, this will cause a lot of criticism in the industry and about the industry," Mr Koren said.

A distressed Mr Chen told The Sunday Age he had been treated unfairly.

"They told us because contract had not yet been signed the vendor would sell to whoever would give them the highest (amount). I wouldn't negotiate. It's not a money issue, this is bullshit," Mr Chen said. The property eventually sold for $3000 above Mr Chen's bid.

Robert Larocca, a spokesman for the Real Estate Institute of Victoria, said convention holds that a property is sold at the fall of the hammer, although legally the sale only occurs with the signing of a contract.

"It's a bit of a grey area," Mr Larocca said. "The (State Government) is currently reviewing auction law with a view to changing the law so a legal contract comes at the fall of the hammer."

Mr Som said that while the outcome was regrettable, the agency was obliged to look after the best interests of its client.

"We're not happy with the way it happened, we were not looking for this to happen," he said. "But again we are working to get the best price for our vendor."

Mr Chen said he intended to lodge a complaint with the REIV. Mr Larocca said the institute would be happy to investigate after a formal complaint was lodged.

When is it sold?

Consumer Affairs Victoria says that when the auctioneer has reached what seems the final bid, he or she will announce, "Going once, twice, three times . . . SOLD!"

"There are no further offers accepted after this point," it says, but there is no legally binding contract until the buyer and seller have signed the contract of sale

Author: Chris Vedelago
Date: November 21, 2007
The Age Domain

Responses of outrage and incredulation to the story

1. Consumers' wrath
I was incensed to read about the real estate company that auctioned a Burwood East house twice and in the process denied Mr Chen securing the property with his winning bid.
If I was in Mr Chen's shoes I would attend all future auctions of that scurrilous company, outbid the field and, as the crowd dispersed, simple back out of the deal.
"I've changed my mind - taa all the same" should suffice. Let them feel the wrath of the consumer.
David Hodgson, Sunbury

2. Put First National Last
What disgusting behaviour on the part of First National. It is a sad state when we need to rely on laws for people to behave with decency and act in good faith.
When we attend an auction, we all know the rules and the expectations of everyone else there. "Going once, going twice, sold" .... congratulations to the buyer and seller, the end. To accept a higher bid afterwards, even if the law permits it, is plainly cheating.
I would encourage all fair-minded people to boycott First National.
Sean Fremder, Caulfield

Letters to The Age

15 Dec 07 - REIV news

REIV: "I am pleased to inform you that the Minister for Consumer Affairs has formally advised the Institute that the government will amend the Sale of Land Regulations 2005 to prohibit late bids at public auctions. This follows sustained lobbying by the REIV on this issue. The prohibition will apply to all auctions, not just residential.

The Regulations will be amended early in the new year. It is anticipated the amendments will prohibit late bids both on sales and pass-ins and provide a substantial penalty for auctioneers who fail to comply.

The impending change clearly indicates the government and regulators consider the taking of late bids is completely unacceptable behaviour."