Auction Bullying

Peter Mericka B.A., LL.BOPINION
by Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
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“Auction turns to scuffle” is the title of an article by David Nankervis of the Adelaide Sunday Mail (p.36).

The article describes how police were called to a house auction after a clash erupted between a bidder and the auctioneer.

Auction bullying

The bidder, Russell Mallory, was acting on behalf of his parents and wanted clear instructions as to how the purchaser was to be named in the contract. But while Mr Mallory was discussing the matter with his parents over the telephone, the auctioneer, Mr Richard Thwaites of LJ Hooker Kensington, decided that the property would be sold to the second highest bidder whose offer was $1,000 less.

The estate agent led the second purchasers into the house, and Mr Mallory attempted to enter the house as well.

“But the auctioneer closed the timber front door on my arm and leg, which caused a bit of pain, and when I pulled away he locked the door in my face,”

“Thwaites re-opened the bidding while I was on the phone with my parents, who said I could sign as the purchaser if that was what the auctioneer demanded.”

According to the auctioneer, Mr Mallory could have signed the contract “and/or nominee”.

“…he refused to sign and I said I would offer the property for sale.”

“The new owners had the right to sign a contract in privacy and I was ensuring that they did.”

It has become commonplace for estate agents to exert control over all parties at an auction. In recent times we have seen situations where estate agents have used the auction as a means of bullying purchasers into accepting unfair sale terms.

The most common forms of auction bullying are quite subtle, taking the form of lies told by the estate agent or auctioneer regarding the purchaser’s right to change the contract.

A purchaser is entitled to make alterations to the contract provided by the auctioneer, if the terms and conditions are unfair. I advise my purchaser clients to make whatever alterations are appropriate in the circumstances, and then to draw these to the attention of the estate agent. This is to ensure that neither the estate agent nor the vendor are taken by surprise.

While some estate agents accept that the purchaser is entitled to make such alterations, many take the approach that the auction is about their ability to control the situation and that a purchaser who wants to change the contract is a spoiler.

There is an alarming trend among lawyers and conveyancers whereby unfair and owner’s conditions are inserted into auction contracts in the knowledge that the estate agent will falsely advise purchasers that the conditions in the contract can not be changed. We will provide some examples of these terms and conditions in future postings.

What is to be done about auction bullying? This is a difficult question to answer because deception, lies and intimidation are essential components of the real estate auction. It takes a courageous purchaser to stand up to an estate agent on auction day, and it takes an equally courageous lawyer or conveyancer to argue on behalf of the purchaser who is confronted with an unfair contract (particularly when so many lawyers and conveyancers rely heavily on referrals from estate agents in order to stay in practice).

It has been suggested that Consumer Affairs Victoria (CAV) should take steps to protect consumers. Unfortunately, experience suggests that Consumer Affairs Victoria will not be too quick to move from its comfortable position on the sidelines.

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