Using an auction to buy or sell a house has long been thought of as “unsavory.” Many sellers have seen it as a last resort, an act of desperation. This isn’t a completely unfair analysis — there are lots of auction tactics out there (such as shill bidding) that range from questionable to downright shady.
RealtyHive does not condone any such practice. We distance ourselves from shady auction tactics entirely, but all the same we think it’s a good idea to keep your eyes out for anything that could potentially rip you off.
Shill bidding is one of the most common examples of a shady auction tactic. In shill bidding, a seller will have a friend or family member place bids to drive up the competition. While the backfire could lead to the “fake” bidder having to pay up, the potential benefit could gain the seller a lot of profit.
When it comes to selling a house, shill bidding is designed to help the seller. It absolutely hurts the buyer. This comes as a surprise to most people, but many real estate auction sites allow sellers and even agents to bid on their own property.
Rest assured, RealtyHive has a strict no shill bidding policy. We make sure no sellers have any part in the bidding process of their own properties.
Most auctions have a set time where people can place bids. At the end of that time, the highest bid is the winner — a format most of us are very familiar with.
However, some auction sites say they have a set time but it’s not actually the case. For example, a site might hold bidding from 10 a.m. to 4 p.m. If a bid comes in at 3:59, they add two more minutes. This keeps going until no more bids are added.
Again, this might seem beneficial to sellers, but it hurts buyers by providing more leeway to hike up the price. At RealtyHive, we’ve designed our bidding structure to be as fair as possible.
Some auction sites say that a seller can only sell when a Reserve price is met. Oftentimes, they won’t tell the buyer what this is. If this mysterious Reserve price isn’t met, the site might put the property for sale again. This tactic might not hurt someone outright, but it could still pose an inconvenience. At the very least, it’s best to work with an auction company that’s as transparent as possible.
Savvy buyers and those who work with agents will likely not have to worry about this, but it’s a shady auction tactic to watch for all the same. An auction site might take a home that’s worth, say, $300k and put the opening bid at $400k. Again, this helps the seller but drives the price up for the buyer, unnecessarily.
More than anything, when it comes to buying or selling a house, you want to do your due diligence. This is true regardless of if you work with an auction site or not. But the great thing about RealtyHive is that you don’t have to be wary or worry if you’re getting ripped off.
You can use an agent (and if you use Cashifyd, you can get cash credit at closing but it’s OK if you want to use your own). You can finance your house as you would normally buy a house. You can still put in an offer before the bidding day. You can take a walk-through. As a buyer, you might score a deal and as a seller, you might make an even greater profit.
Don’t risk it with shady auction sites — work with RealtyHive for a verified and trusted time-limited event.