The auction system for selling residential real estate has seen its fair share of tweaks and refinements over the past 18 months.

There’s been the rise of online auctions, plus an increase in the use of boardroom auctions.

The traditional street auction has also been subject to change in the face of COVID-19 restrictions. At various times since 2020, caps have been placed on the number of people who can attend auctions, resulting in some areas outside a street auction being roped off.

But what hasn’t changed is the pivotal importance of fairness and transparency to the auction selling process.

Yet, not everyone recognises that there can be significant differences in the way franchised real estate agents and wholly-owned real estate agency companies, such as Nelson Alexander, apply standards of transparency to auction sales.

The use of auctions to sell goods dates back to the Roman Empire. What was important to buyers back then – being able to see and eyeball your full competition – is just as critical today.

This demand for transparency from both buyers and sellers has helped make Melbourne the entrenched auction capital of Australia. Auctions are widely favoured to sell million-dollar-plus properties.

One all too common – and annoying – experience for prospective real estate buyers occurs when they see an advertised property that they like.

A buyer then goes to the trouble of inspecting the home. Maybe this person inspects two or three times, and certainly, they tell the selling agent that they’re interested.

But then the property gets sold to another party who has made an offer before an advertised auction or perhaps to the close-off date of an Expressions of Interest campaign. And the other would-be buyers haven’t been given an opportunity to make a counteroffer.

These kinds of “under-the-counter” property transactions may be happening with increasing frequency in Melbourne. Still, it’s a big mistake to attribute the phenomenon to the city’s robust real estate market.

Instead, the level of transparency that occurs with residential property transactions and the degree to which all interested buyers get fairly treated depends very much on the type of real estate company you deal with.

Nelson Alexander Company Director Arch Staver says there has been a considerable escalation in the number of boardroom auctions being held in Melbourne this year.

“This is occurring because people are making prior offers, and those offers are being challenged,” he says.

Boardroom auctions typically see properties go under the hammer in a room with all the interested parties seated around a table, or they can be held online.

But not all agents, particularly the franchised agency chains, let those who have inspected or expressed interest in a particular property know that a prior offer has been made.

Franchises typically have defined sales territories. This means that a franchisee selling a property may prefer to offload that home to a buyer they have found rather than lose commission income by considering a rival offer from a buyer who has been introduced by a second agent operating in a separate sales territory.

There is little opportunity for such potential conflicts of interest to arise when dealing with a real estate company that is not a franchise.

All of Nelson Alexander’s 16 offices are wholly owned by the company’s partners. This structure results in the easy flow of sales, buyer and leasing, leads between offices and staff and delivers full transparency to those buyers and sellers who use the company to transact property sales.

“Because of the way we handle pre-auction offers, a buyer will not miss out,” Mr Staver says.

“Even if an offer is made for a property and it is an acceptable offer, we have a duty to contact each and every other person who has been through the property and let them know that is to be sold.”

Apart from informing other buyers of the price of a prior offer, Nelson Alexander selling agents also inform the other buyers of the proposed settlement terms that have been placed on the table.

“If someone wants to challenge that prior offer, we bring them into a boardroom auction, which can be held online or at one of our offices,” Mr Staver says.

“Some agents will just slam a sale home when an offer comes on board.

“I’ve had many buyers ring me so distressed. They tell me that they were looking at a property with another agency, and it was sold beforehand and they weren’t even given the courtesy of a call. These buyers were quite willing to pay more than the price offered.

“We take the duty of care to buyers very seriously.

“And often when an agent neglects that duty of care to buyers, it has an impact on the vendor. How can you ever be sure that you have achieved the highest and best price and the best transaction conditions when you don’t explore the sale with every prospective buyer who has been through the property?”

He says one of the reasons Nelson Alexander has run more boardroom auctions in the past few years is that there has been an increase in the number of people trying to buy a property before a public auction.

“When an offer is made, if that offer is to be challenged, it automatically goes to a boardroom auction,” he says. “And obviously, because we are in a strong market, we’re finding that an acceptable offer more often than not is being challenged. This is leading to an increase in the number of boardroom auctions.”

Boardroom auctions tend to be a little more intimate for all involved compared to a street auction.

Buyers are nearer to the competition. They can take comfort that all the people in the boardroom or participating in an online setting are genuine purchasers.

“You don’t have to gaze around the street at a swelling crowd that very often is made up of homeowners in the neighbourhood, and try to work out who you are competing with,” Mr Staver notes.

“There are some vendors who specifically ask for a boardroom auction, only because they prefer the discretion and don’t want the theatre of an auction happening outside their house.

“But the main reason there has been a huge escalation in the number of boardroom auctions is that people are making prior offers, and those offers are being challenged.”

If you would like more information on buying and selling strategies, please contact any Nelson Alexander office.