Dummy bidding

I remember when this practise was ruled out by new legislation. Much of 2002 and 2003’s newsfeed covered the reasons for the crackdown, including citing fines for those caught dummy bidding (or arranging dummy bidders). Agents wondered how the declaration of “vendor bid” would impact auctions, and at the time I recall a broad commitment to comply across agencies. Of course, not all complied immediately, and fines were handed out.

Dummy bidding refers to a non-genuine bidder, planted in the crowd to deliberately drive up genuine bidder’s bids. It’s a precarious practise when we think about it. The dummy bidder has to execute their bids perfectly, creating a feeling of competition, but not bidding over their opponent bidder’s limit. In previous decades, (prior to the practise being outlawed), auctioneers could share signals with the dummy bidder, indicating when to stop. Adjusting ties, touching their nose, etc., these secretive tactics could sometimes be spotted by a wary and experienced bidder. Sometimes an auctioneer could pretend to take a bid from out of nowhere; perhaps pointing at a tree or a van.

In today’s day and age, it’s hard to believe that dummy bidding was common. We certainly have adjusted to the concept of the “vendor bid”. It’s either a method used to get an auction started, or it’s employed when a property is likely to pass in. In the case of the former, we all can relate to a slow auction start when bidders look at their feet and wait for someone else to make the first bid. It’s why some agencies have staff walking around the auction, handing out boxes of chocolates. Better to entice a bid out of the crowd with a $12 box of Lindt than face the pain of placing a vendor bid.

And for the latter, an auctioneer will be mindful of passing a property in with a price tag that is closer to the vendors reserve. This is for two reasons; a vendor bid auction result is usually captured by the data houses and anyone can look the result up. And for those in attendance, psychologically a buyer will be less inclined to pay market value if they have watched a property pass in at a level significantly below true value.

A vendor bid pass-in doesn’t necessarily signal a poor-quality, or overpriced property.

It can sometimes simply mean that the right buyer wasn’t at the auction. Maybe they aren’t in the market yet, or maybe they assumed the property would sell for a higher price.

But, back to dummy bidding. It’s rare that we read about dummy bidding these days, although we do still see stories break such as this one about the most recent Block series.

Dummy bidding was outlawed on 1 February 2004. But does it still happen? I imagine it does, but it’s not always easy to spot, especially when a dummy bid is made by a person, (as opposed to a tree). Knowing your value, maintaining a sensible and firm limit, and having a preparedness to ask the auctioneer to confirm a bid are good approaches.

I was bidding recently at an auction for a client. I had developed a good rapport with the agent (and auctioneer) over the course of the campaign and I greeted him warmly on auction day. This is not unusual, particularly after more than two decades in the industry. We do get to know fellow agents over a long period like this.

I was dressed professionally for the auction, wearing suit with a tailored coat and high heels.

Could have I looked like an agent? For sure.

Due to the rain, we were all indoors for the auction. Indoor auctions are more intimate and buyers are less spread out, making body language observation much easier. When the auction preamble finished, I promptly placed the opening bid. By this stage, I had identified my likely competing bidders by their body language. Both were young couples and each had a parent with them. Couple #1 had decided that Dad would bid for them. He stood close to daughter who seemed to be giving him the instructions. After two quick-succession bids back and forth, I noticed her father was agitated and pointing at me in his discussions with her.

He thought I was working with the agency, and I heard him say, “She’s not a real bidder”. He was adamant and told her sternly that they were not bidding against me. Interestingly, my buyer was standing in the crowded kitchen just behind them, noting everything that was going on too.

Had he asked the auctioneer openly if I was a real bidder, his concerns may have been put at ease. But he didn’t. They didn’t bid any further and we secured the property $5,000 above reserve when the other couple challenged us.

Dummy bidding is illegal and there are fines for those who breach.