When an Auction Turns Into Disaster

Aug 03, 2017

With the property market still driving forward, I thought it was time to share the lessons learned from an auction I witnessed a few years ago now. It was, without doubt, a lesson in relationships, money and what happens when you fail to stick to your auction limit.

The auction starts the Auctioneer declares the property on the market, a beautiful Californian Bungalow, on a flat piece of land in a desirable waterfront suburb in the south of Sydney, a property with good bones, but one in need of a complete renovation. As I stood on the tree-lined street, the crows continued to grow and the auction started slowly with an opening bid of $900,000 the typical auction games were played between the bidders, keeping the auction progress almost to a snail's pace as the bidding took almost 10 minutes to reach over the million dollar mark.

In the front a young couple who had been bidding from the start, consistent and strong and who regularly were communicating with each other, let's call them the Savvy Couple.

A new bidder jumps in, taking the bidding up to $1,010,000 and then the Savvy Couple strongly bid back. The Auctioneer calls it once, twice and then from nowhere another bid comes from a young women standing next to her husband as she yells, $1,030,000. The husband clutches his face in his hands in anguish; it was a scene in 10 years of attending auctions I had never seen. He was aghast; as the young women stood there ignoring his clear concern and frustration. The scene was tense as he grabbed her by the arm and told her to stop as he pleaded with her, this unprepared couple were now fracturing in front of the hundred strong crowd watching bewildered.

The Savvy Couple bid again. The sense of relief on the face of the husband from the fractured couple was plain, as he walked away from his wife down the street to get away from the auction in an attempt to not bid.

The Auctioneer again began to call it once then twice to the Savvy couple. The wife from the Fractured couple grabbed an agent and asked him to pause the auction as she chased her husband down the street and forcefully said ‘can I bid or not’. The husband then reluctantly pulled out his phone and started to call… who he was speaking to it was hard to tell. But what was obvious was that this couple had gone over their limit they had set to purchase this particular property. He then told his wife she could go to $1,050,000 at which she immediately ran back and bid, and then kept bidding.

The Savvy couple was outbid and they comfortably and calmly stood aside from the auction proceedings. The Fractured couple continued and won the day. Or did they?

As the Auctioneers hammer went down the Fractured couple were in very different places. The wife elated, the husband noticeably concerned. So what are the lessons we can all learn from this?

  • Know your limits. Agree with your partner on what you are prepared to pay and don’t forget to consider the renovation costs. If one of you is likely to get drawn into the emotional roller coaster have someone else bid for you.
  • Respect your partner in financial decisions. Buying a property is not something that is cheap to unwind. This is an extreme case, but financially the stress if the Fracture couple have stretched beyond what they can afford with no doubt put pressure on their relationship.
  • Importantly seek professional mortgage broking and financial advice when purchasing a property so you are both on the same page.

Having since spoken with the agent a few years on now, although property prices have gone up and they have financially won because of this. The couple themselves have never moved into the property and it remains in desperate need of renovation. Something they cannot afford to do.

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