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The adverse effect of dummy auction bids on market value

Reed, Richard, Robinson, Jon and Williams, Peter 2002, The adverse effect of dummy auction bids on market value, Australian property journal, vol. 37, no. 3, pp. 202-205.

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Title The adverse effect of dummy auction bids on market value
Author(s) Reed, Richard
Robinson, Jon
Williams, Peter
Journal name Australian property journal
Volume number 37
Issue number 3
Start page 202
End page 205
Publisher Australian Property Institute
Place of publication Deakin, A.C.T.
Publication date 2002-08
ISSN 1441-4929
Summary The popularity of an auction as a means of selling residential real estate has increased markedly in recent years. The effectiveness of an auction program is heavily promoted by most real estate agents, claiming it to be the best means of attracting the best price from the highest bidder, It is based on the theory of gathering all buyers together at a publicised time, and then offering the property for sale to the open market.

In theory, the person most willing to buy the property will have the highest bid, supposedly agreeing at market value with the vendor (although above the vendor's reserve I. Unfortunately, the practice of dummy bidding has recently resurfaced and highlights serious flaws in the auction system, with hundreds of residential auctions conducted across Australia every weekend.

Clearly, it is in the vendor's best interests land the auctioneer's best interests, who is paid even more by the vendor if the price is higherl to achieve the highest offer from the last bidder. The tactic of dummy bids is designed to deceive genuine purchasers into a false sense of perception, where there appears to be more competition for the property than there actually exists.

This paper examines the auction process with the emphasis placed on the practice of dummy biding, It considers the broad implications for the definition of market value and also the overall residential market. Useful advice is also included for real estate valuers relying upon auction sale properties in their market analysis. As well as strongly supporting the auction concept, the authors suggest improvements to the overall auction process to ensure relevance to the definition of market value is maintained.
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Language eng
Field of Research 150403 Real Estate and Valuation Services
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2008, Australian Property Institute
Persistent URL http://hdl.handle.net/10536/DRO/DU:30022048

Document type: Journal Article
Collections: School of Management and Marketing
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Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.