KEY POINTS:
An Auckland apartment is being put up for auction this week without any reserve price.
And an agent says if a buyer bids no more than $5000, he will be legally bound to accept it in what could be the bargain of the year in the apartment sector.
Martin Dunn's agency City Sales is selling a fully-furnished unit on level four of the 227-apartment Railway Campus off Beach Rd on Wednesday.
He said no matter what the auctioneer was offered for the 40sq m studio unit, the agency would be bound to accept it. City Sales' advertising, marketing and auctioneering fees on the deal are $15,000.
But Mr Dunn said people should not arrive on Wednesday automatically expecting a bargain because the agency had used the no-reserve technique twice before and achieved good prices.
Two months ago, it sold a Duxton apartment on Greys Ave opposite Myers Park without a reserve for $100,000.
And a month ago, City Sales auctioned another Railway Campus unit without a reserve for $71,000.
"The reason we're using this new method of selling is because these units are so hard to price," Mr Dunn said. "The Duxton unit was subject to a 30-year lease and the Railway units are subject to a lease agreement with Auckland University. So you can't be too clever on how to price these types of properties and auctioning without a reserve is the best way."
The Railway unit had generated annual rent of $6000 and although this had dropped lately, Mr Dunn said the university had a marketing campaign to pitch the units at short-course summer students and he expected rents to rise.
Peter Thompson, director of Barfoot & Thompson, said no-reserve auctions were an unusual way to sell property. The method could push up prices because it might encourage people to compete, but it was risky.
Harcourt chief executive Bryan Thomson also said no-reserve auctions were rare. They could get the highest instead of the lowest price because they drew more people. But buyers had to be extremely courageous to sell like this.
"The fear with these sorts of things is that someone will bid $1 - but if the agent has done a good job, there will be bucketloads of people there on the day and they'll bid strongly against each other," Mr Thomson said.
* The auction takes place at 11.30am on Wednesday outside City Sales' offices, 445 Karangahape Rd.