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How to handle a favoured bidder at auction

20 November 2017

Cooley Auctions Director Damien Cooley gives his advice on what to do at auction when an owner favours a bidder.

Occasionally at auction an owner may have a bidder they want to sell to, even if another potential buyer has bid a higher price. However, are you able to turn down the highest bid and how should you handle a situation like this?

Damien said: “An owner is entitled to sell the property to whoever they like and under whatever terms they choose. It is the owner’s contract and they are within their rights to choose who is going to be the purchaser for that property.”
He added that this situation can happen in various scenarios, but gave the example of differing settlement terms.

He explained: “If the highest bidder is purchasing the property on a 12-week settlement with a 5% deposit, and the under bidder has agreed a 10% deposit and six weeks’ settlement, the owner can choose to sell the property to the under bidder.

“Auctioneers are able to refuse any bid they feel is not in the best interest of the vendor.”

Damien added that this scenario plays out quite often with properties that have a mortgagee in possession or a receiver sale, where the previous person has declared bankruptcy and is trying to buy the property back under a different company name.

Auction advice

Damien said: “My advice for any auctioneer in this scenario is to avoid making it common practice. It is not a pleasant conversation to tell the highest bidder that it is not a big enough difference to make it palatable for the owner to sell on the terms requested.

“Wherever possible I would speak to the owner about making sure that if they agree to the terms with a buyer to stick to them. If they don’t agree you can give the highest bidder an opportunity to either match the same terms of the favoured buyer, or pay an increased amount that is favourable to the owner

“However, the owner is legally allowed to sell it to whoever they like and it is not the real estate agent or auctioneer’s decision on who that is. We can advise on what we think is the right thing to do, but what is right and what is legal are completely different in this case.”