Whilst attending the annual Harcourts conference this week I got into a conversation with the manager of their office in Gore – the topic quickly focused on the much publicised auction on Trade Me for the 20 acre farm being marketed as a “Buy a tractor and get a 20 acre farm for free“.
He helpfully highlighted the fact that this property has been actively marketed in the past and is in fact still being marketed by one of his team on our website as a 20 acre rural / lifestyle section in Owaka. The listing is marketed with a fixed price of $230,000 – this listing price actually being lower than the current bid at this time for the “tractor” on Trade Me, standing at $233,032.
Whilst I wish the vendors of this section of land all the best with their auction, and applaud their innovation in creating a mechanism which has generated so much interest, both domestically and internationally, such that the listing has so far been viewed over 228,000 times with over 1,000 questions – I do have some sense of concern which I felt needed highlighting for the benefit of interested property buyers and sellers.
Here are my comments:
- This is an auction for a tractor – not the land. The listing does state correctly, as does the Trade Me terms and conditions, that the “Contracts for the sale of land must be in writing to be legally enforceable” – land in this sense is both bare land and the land in the context of the legal title for a property. This is why Trade Me ceased operating online auctions for properties a number of years ago.
- The terms and conditions of the Trade Me website state that “If you are notified that your bid had been successful, you must complete the transaction in the manner specified. By making a bid, you warrant and represent that you have the legal right to enter into and complete the transaction”. This does not mean that you are as legally committed to transact the sale as would be the case in a Sale and Purchase Agreement required of the purchase of Property or land. Sadly it does occur from time to time on Trade Me that auctions are not completed after the auction has finished.
- Whilst the novelty of this auction has caught the attention of the public and the media, I am of the fervent hope that the winning bidder does go through with the purchase and fronts up to complete the legal Sale and Purchase agreement.
- Additionally, it is important I believe to highlight that any success (or perceived success) of this auction will lie not in the mechanism itself but in the novelty of the mechanism, lest we should suddenly see a raft of similar offers: “buy this car and get a house for free” or “buy this boat and get a free beach-front house for free”, especially if those were marketed as $1 reserve auctions.
The fact is that the transaction of any form of real estate is a complex and challenging process. The market for real estate is very illiquid – meaning there are not a lot of buyers and sellers. Equally, real estate is not homogenous – that is to say that whilst there are at this time four International 574 model tractors on Trade Me, all of which are identical save for the age and condition, almost every property in NZ is almost completely unique given location, size, construction, form and condition. It is for these reasons, not forgetting the scale of the financial considerations, that real estate purchases need to be carefully assessed. It is far too important to be left to the euphoria or hype of an online auction to sway the proceedings.
Some vendors may be under the mistaken impression that online auctions are no different from on-site auctions. Nothing could be further from the truth: on-site auctions are handled by trained professionals who go to great lengths to ensure all those bidding are made aware of the legal implications. The auction is undertaken by a licensed auctioneer and on behalf of a licensed real estate agent who has a legal contract with the seller for whom they are acting. The auction can be halted at anytime to ensure all parties are fully apprised of the facts and any questions asked – there is certainly no looming deadline for bids!
So whilst I am not intending to stand in the way of the progress of innovation in the marketing of real estate – I think it is important to bring some transparency to ensure that the hype surrounding what appears to be a “sure fire winner” for all parties does not become a sad tale of future dreams crushed under the heavy burden of reality. Property marketing and sales is a challenging and complex process which brings together willing buyers and willing sellers, and endeavours to create an acceptable agreement.
I wish the vendors of this 20 acre section all the best with their sale as it reaches a close on Sunday. Equally, I trust that the bidders participating in the auction have fully researched this land; that they have ensured they are making informed decisions behind every bid; and then they go through with the sale, should they be the successful bidder.
I see that Stuff Business has published an article on this post. The comment from Trade Me is very interesting:
Trade Me head of commercial Mike O’Donnell responded to Helm’s criticisms by saying Trade Me always ensured its customers were not misled and that Helm was simply frustrated Trade Me had 2.5 times more listings than Realestate.co.nz.
“I would suggest that Alastair Helm is suffering from auction envy,” said O’Donnell.
I think Mike O”Donnell may be mistaken on the statistics, realestate.co.nz actually has around 35% more listings than trade me property. Trade me property has more visitors – not quite 2.5 times, in April it was the case that trade me property had 797,396 UB’s and realestate.co.nz 354,357 UB’s which is not 2.5 times the traffic either!
As for claim that we might be suffering from auction envy! – I am not sure what prompted this comment, we are very happy to be a listings portal providing a great service to the real estate industry of NZ – we have no desire to be an auction site – maybe that is where we clearly see our respective roles somewhat differently.
I was just about to offer a badly run down rotting letterbox for auction with a house and land attached for free – LOL! You have talked me out of it Alistair!
Seriously though when trademe allowed property auctions I know of one instance where the seller could not get the purchaser to follow through and make the sale binding by the signing of a sale and purchase agreement. I am sure this would have been a frequent occurence an no doubt complaints forced trademe to withdraw property auctions from the site.
Competition…….the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.
Is there a winner in this exercise?
Just like Brad Maxwells attempt they will keep coming…its the outcome not the journey in this case, so would be most interested too Alistair to see if the S&P gets signed for the final bid amount?
Auctioned closed at the alloted time with the winning bid of $250,000 being placed on Saturday – the day before the close – that final bid was a clear statement of purchase, the prior bid was for $233,032.
Why did the final bidder over spend by $17,000?