Vendor bidding okay say auctioneers

By ANNE GIBSON

Having phantom bidding at an auction is illegal, but it is all right if the phantom is the auctioneer.

Auctioneers backed moves to purify their industry but still wanted some of the "mystery" to stay in the process, said Auctioneers' Association secretary John Ward, who supported the Real Estate Institute's plans to implement a code of conduct that would outlaw dummy or phantom bidding at house auctions.

While this bidding was illegal, vendor bidding was not and should never be, Mr Ward said.

"We hope they don't take the mystery out of it."

Real Estate Institute president Graeme Woodley agreed, saying vendor bidding was fine as long as it was declared at the start.

Mr Ward said vendor bidding, whereby the auctioneer bids on behalf of the person selling the property, must remain an important part of the business so that not all the drama of the auction was removed.

"People don't understand the difference between vendor bidding and dummy bidding," Mr Ward said.

"In Auckland, dummy bidding at house auctions is prevalent and it's a racket.

"The practice of any licensed auctioneer employing so-called fake bidders, puffers or spooks to bid at any auction is repugnant and a skilful auctioneer worth his salt has no need to engage in this fraudulent and deceitful practice."

Dummy or phantom bidding is when a person is planted in the crowd as a stooge to "bid" to ramp up the price.

Mr Ward wanted to emphasise the difference between this and an auctioneer bidding on behalf of the vendor to reach the reserve, then taking bids from the crowd.

But Barfoot & Thompson chief Peter Thompson said both practices were wrong.

It was unscrupulous for auctioneers to invent any bids, either from the vendor or a plant in the crowd, and his agency banned vendor bidding and phantom bidding," he said.

"We don't permit either because it's not in the interests of the public."

Auctions and tenders were increasingly popular methods of selling houses, accounting for at least half the 14,000 properties sold by his firm this year, said Mr Thompson.

"Ten years ago, it was only a third."

Pakuranga real estate agent Janet Dickson, of Barfoot & Thompson, said auctioneers sometimes made a joke of dummy bidding.

"They ask how many people have attended an auction before and when most people put their hands up, they say that's the only way to bid around here."

But Mr Ward defended vendor bidding, saying as long as no person in the crowd was indicated and the vendor had instructed it, this practice was quite okay.

He cited the example of a house with a $200,000 reserve, for which bidding was opened by the auctioneer at $150,000. Although no bids might be received from the crowd, the auctioneer was entitled to bid between $150,000 and $200,000 without disclosing where the bidding was coming from, in order to reach the reserve and draw real bids.

"If the auctioneer is instructed by the vendor to do their bidding, that's not illegal," Mr Ward said.

It was entirely different from taking phantom or dummy bids from a plant in the crowd.

The association, which had 103 company and individual members, had input into the institute's draft code, Mr Ward said, but had its own code of conduct posted on the www.auctioneers.org.nz website.

The Real Estate Institute is seeking Commerce Commission backing for its draft code, following a crackdown on unscrupulous sales techniques and advertising.

The institute also wants to bring in codes setting rules for sales by tender and real estate advertising.

Mr Woodley said more transparency was needed in the industry and auctioneers should say if they were opening the bidding on behalf of a vendor.

But he agreed with Mr Ward that auctioneers must retain the ability to bid on behalf of the vendor.

Consumers Institute chief executive David Russell has backed moves to give people more protection and welcomed the idea of a code.