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- OPINION

False profits a blight on Sydney's religion of real estate
Dummy bidders are a pervasive - and illegal - part of the property auction scene. But what is being done to get rid of them? By Paul Sheehan

If real estate is the religion of Sydney - and the $3 billion spent by buyers during the past three months suggests the faithful have been unmoved by images of war and recession - then the real estate auction is the sacramental ritual. And what a pagan ritual it is. Every week, in every suburb, housing auctions provide a marvellous outlet for cheap theatre, lifestyle voyeurism and dirty deeds done dirt cheap.

At a recent auction I heard a woman tell a complete stranger, "You dirty rotter. You should be ashamed of yourself."

The dirty rotter had put a chill on the festivities by asking about a development application lodged for the property next door. It seemed the vendors had neglected to mention this to any of the prospective buyers.

Despite this chill, bidding started briskly, but the initial flurry came from what appeared to be ludicrously transparent false bidders. The auction then settled into a two-way battle between a nervous woman clutching a contract and another woman who was decidedly nerveless.

Throughout the proceedings the relaxed bidder leaned on a car, giving the impression of someone with nothing at stake.

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It was soon obvious why. When the bidding stopped - and the relaxed woman had "won" the auction with the highest bid - the auctioneer said the owner's reserve price had not been met. The property was passed in. After all the colour and movement the house had never really come on to the market. In other words, about 40 people had attended the auction and only one of them was, for certain, a legitimate buyer.

One against many. It happens all the time. Lying at auctions (or "buyer support", as agents euphemistically call it) is now so pervasive and so ritualised that three weeks ago the Minister for Fair Trading, John Watkins (since gone to the education portfolio), actually spent Saturday attending four auctions and, like Claude Rains in Casablanca, expressed shock - shock! - at what he found. He described the amount of dummy bidding as "extraordinary".

Every adult in Sydney knows how much shadow-boxing and attempted price-padding goes on in our auctions, yet, because it is part of the fabric of social habit (unlike the social fabric of most cities in the developed world, where sellers usually name their minimum price), there has been inertia about reforming the system.

Until now. Although the phantoms of the auctions are regarded as cute or inoffensive or useful, false bidding is, in fact, against the law.

Under the Property, Stock and Agents Act, which has not been significantly reformed since 1941, agents for the seller are allowed to participate in their own auction, but each time they do so they must announce it is a vendor's bid.

Failure to do so can result in a fine of up to $2,200.

Right. When was the last time you ever heard the words "vendor's bid" at an auction? When I asked the Department of Fair Trading how many people had been fined for dummy bidding in recent years (decades?) the department was unable to provide any cases. But the minister's spokesman did say the NSW Government was committed to "chipping away at the practice" and that three cases were under investigation.

Legislation is expected to be tabled this week in State Parliament requiring prospective bidders to register, provide proof of identity and be assigned a number before they can bid at an auction. A central database of registrations will be kept to identify multiple bidders.

The maximum fines for false bidding will be ramped up $11,000 for individuals and $22,000 for companies. Auctioneers will also be required to be licensed.

The shortcomings of the proposed reforms are obvious, and the existing tolerance of dummy bidding does steer the process toward the vendor's price threshold. But if it persists, then it is clearly designed to induce legitimate buyers to bid against themselves - and when deceit costs people money it is fraud.

It would save a lot of trouble if people began bypassing the cowboy factor in Sydney real estate. Buyers could exercise discipline and wait for properties to be passed in.

Sellers could follow the global norm and put their asking prices into the public domain. If more than one buyer wants the place, then the silent auction begins. But Sydney would be more dull - less cheap theatre, less voyeurism and less dirty deeds done in the street.

psheehan@smh.com.au

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False profits a blight on Sydney's religion of real estate

Source: geocities.com/sun_day1080110801