How to protect your money from dummy bidders at property auctions

by Chris Lang on November 8, 2010

Property Auction Property auctions are pretty expensive staged shows. They are free for the crowd, but can be rather expensive for the bidders. To make them even more expensive for the genuine bidders, some agents and auctioneers use dummy bidders to help drive the price of the property up.

Not sure what dummy bidders are?

Dummy bidders are people who are planted in the crowd to make false bids and help increase the price of the property. They could be the estate agent’s or the auctioneer’s friends, vendor’s relatives, basically anyone interested to help sell the property for more (and stupid or careless enough to risk a fine of $20,000 – $60,000 in Victoria). This activity was declared illegal in 2003.

How to spot a dummy bidder?

No agents in their right mind will ask a dummy bidder to bid closely to the reserve price – the price at which the vendor is prepared to sell. The main purpose of dummy bidders is to get the bidding to start, and after it’s started to get the bids over the reserve price. Once the bid is over the reserve there is always the risk that genuine buyers will get scared off by the competition and then, if the last bid belongs to a dummy bidder, the sale is in trouble – after all the vendors had no intention of selling to their best friend 🙂

So wait till the bids have passed the reserve (and you will know when that happened because the auctioneer will announce that “the property is on the market” or “the property is selling today”). People who continue to bid after the property is “on the market” are genuine bidders, and the rest who were bidding earlier but now remain silent are probably not your competitors.

In addition, I’ve found this nice list of ideas on how to spot a dummy bidder – and it really makes sense to me.

What can you do to stop a dummy bidder?

Frankly, not much. But the least you could do when you suspect a dummy bid is ask the auctioneer loudly “Is that a dummy bid?” and then remind him/her that dummy bidding is a criminal offense. Apart from that, of course you could report or sue the person, but unless bidders are registered (and they are not required to be in Victoria) that would be tricky.

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