Real Auction Sites - with No Fake/Shill Bids?

Question

Are there any legitimate auction sites available on the web, large or small, that do not use fake or shill bids?

Ran into this during due diligence on Auction.com:

Props to Auction.com for making a transparent disclosure and not burying it in the PDF downloads, but seriously??? Submitting fake bids to bump price is legal? Plus charging a $2500 minimum transaction fee?

Didn't see this on Hubzu's site, although I didn't pour through the documents as I did Auction.com's site, so would appreciate some feedback here.

Wayne Brooks · Answer

Well, this may all be "new" or fishy to new bidders on these auction sites.

But, it's quite simple, and they all work the same:

The auction co. may bid on behalf of the bank/seller

There IS a reserve, and it is Undisclosed. So no, high bid doesn't necessarily get the property. Hence, why you sometimes see a "No Reserve" advertisement on an auction, when there is Not a reserve price.

If the high bidder hasn't met the Undisclosed reserve, the bank may or may not sell at that price.  They may give a counter offer at a higher price.

This has been SOP in the REO auction world for years, nothing fraudulent to complain about.  It's how the game is, paly it or not, it's up to you.

Account Closed · Answer

Did some additional digging with some follow up articles:

#1

California Realtors are apparently trying to pass a law prohibiting this shill bidding.

#2

Other BP forum posts

http://www.biggerpockets.com/forums/311/topics/177...

http://www.biggerpockets.com/forums/81/topics/1115...

http://www.biggerpockets.com/forums/67/topics/1793...

Account Closed · Answer

@Wayne Brooks

Then how is this not a fraudulent process? If the owners, or third parties acting on behalf of the owners, are purposefully bidding to influence the final sale price?

Legit question. Not trying to be a rabble-rouser.

Lisa Kohl · Answer

@Wayne Brooks touched on a lot of known facts about these auction sites. I recently wrote a blog post here on BP that addresses some of ins and outs of these sites: http://www.biggerpockets.com/blogs/6630/blog_posts/44315-auctioncom-hubzu-and-homesearch--what-you-have-to-know

John DiGiorgio · Answer

I bid on the same property during two different auctions, about a month apart, on homesearch.com. They started each auction at 52K which was over 50k lower than they listed through a real estate agency. We lost the first "auction" after the highest bid was one bid higher than us. They force bidder by increments of $1500. There was no reserve, so we assumed the highest bidder got it. We were told by our real estate agent (have to have an agent to register and bid) that he was told (by the agent associated with the bank-auction) that it did not meet the bank's reserve. What reserve? When he asked here what was the reserve - he told "just bid higher." Oh...okay!

During the 2nd auction we ended up being the highest bidders, even though still just below the 1st auction highest bid amount - and got the property! Homesearch does not list the bidders, like Hubzu. I have to assume that we were the only real bidders and that the auctioneer was the other bidder(s). I have never heard of an auction, when the auctioneer bidders against the bidders. I have never encountered an auction when the bidder (in this case the auctioneer) is not bound by his bid. So okay...auctioneer bids...bids are not binding...oh...okay! That is not an auction. It is intended as every attempt to deceived the buyer.

The rest of the story is that homesearch has 14 days for the bank to decide if they want tos ell at the high bid. So another new auction trait...being the highest bidder in a no reserve auction by now winning? On the 14th day we get an urgent email saying we have one day to respond (to a pre-contract) or lose our $2500. Then we get another urgent email with the contract telling us we have 1 day to send proof of funds or we lose our deposit...same thing with the completed contract, told we have 2 days to send escrow deposit of lose our credit card deposit. Bullies.

I believe that this sort of "auction" practice leads to wary investors who approach the service with a high degree of suspicion and trepidation - which may become counterproductive to getting a highest bid.

Wayne Brooks · Answer

All third party auction co.s for REO's do it this way.  Same as the bank bidding at the actual foreclosure auction.

Ed Neuhaus · Answer

I have often wondered about how Auction.com worked.  Thanks for sharing.  HUDhomestore.com has a fairly transparent biding process.  But not really an auction.

Real Auction Sites - with No Fake/Shill Bids?

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