what is shill bidding and is it illegal?

speedracing944 · speedracing944's Garage

My wife an I were at a farm auction where they were auctioning off a 6 bedroom 4000 sq/ft 1860's farm house. The man running the auction started calling off the prices and kept dropping it because there were no initial bidders. he started at $400K then $300K then $200K then $160K. He then asked for $165 for a couple minutes an then a mystery bidder bid $165K so nwohe was looking for $170K. After a couple minutes one of the attendees asked what the high bid was and who had it. The Auction guy said he was the high bidder at which point the attendee responded that he was "shilling". There were strong words tossed back and forth between both guys and it got pretty heated in the kitchen. At this point 90%ofthe people just walked out of the auction which ended the whole thing right there and then. The auction guy stateed he knew the old couple wouldn't accept anything under $220K so there was no harm in him trying to drive the price up. Everybody there was pissed off and the old couple which owned the house just broke down crying in front of everybody because they payed $1000 to the Auction guy for this crap.

What are your thoughts on what the auction guy did? Was it even legal?

I feel for the couple who wasted their time and money on this joker.

Speedy

pwd72s · 09-01-2007, 09:51 AM

Yeah, it sucks...schill bidding. I don't know about the legality issue. However, don't kid yourself into thinking this doesn't happen on ebay...

scottmandue · 09-01-2007, 09:58 AM

Quote:

Originally Posted by speedracing944

I feel for the couple who wasted their time and money on this joker.

Speedy

IMHO I would have to agree.

Is this type of real estate auction common? I know the whole idea of having an auction is the hope that two or more people will want whatever you are selling and drive the price up but if they want $220K why not put it on the market and see if they get any offers?

widgeon13 · 09-01-2007, 10:05 AM

More than likely the guy promised them a pretty good profit after the auction, so they paid the $1000 and unfortunately got screwed. The guy is unethical but probably not breaking the law. He should have the ***** kicked out of him because he will do the same to others and get away with it too many times and never delivering the cash.

speedracing944 · speedracing944's Garage

The old couple bought the house by auction 1 year ago. This place has been up for sale/auction 3 times in 3 years. They bought the house thinking they would be able to sell thier other home on the river very quickly. Thier other house never sold and they put tons of time and money into this farm house. They are going to truly loose thier buts on the deal because the market is real bad here right now. This place sold for $190K 2 years ago and $210K last year and now they can't even get people to offer $165K for the place.

Speedy

on2wheels52 · on2wheels52's Garage

It's normally in the auctioneer's best intrest to get the highest sale price, I would assume there's monkey business at most auctions. Stories abound at the one in my town.
Jim

scottmandue · 09-01-2007, 10:34 AM

Quote:

Originally Posted by speedracing944

They are going to truly loose thier buts on the deal because the market is real bad here right now. This place sold for $190K 2 years ago and $210K last year and now they can't even get people to offer $165K for the place.

Speedy

Hmmmmm... last time I was in Milwaukee I liked it alot, maybe I should consider a move.

cashflyer · 09-01-2007, 11:03 AM

Auctioneers can either choose to charge a flat fee, or can charge a percentage fee. Sometimes, they charge both. It sounds like this guy charged them $1k up front, but was expecting a percentage on the back end of the sale. It was in his best interest to get the bidding going.

That being said, it was a conflict of interests for him to place a bid. Normally, shill bidding involves a planted person in the crowd that will start up the bidding. Often, they not only start the bidding, but also work the crowd to get the bidding up to a higher level. They do this by reading the enthusiasm and incrementally raising the bid until enthusiasm starts to dwindle.

Unethical? Yes. Illegal? I don't know. It may be in certain areas, and auctioneers have to be licensed so there may also be a review board for this type behavior. Unfortunately, it is a rather common practice.

Shills sometimes are not the auctioneers people. Sometimes they are the property owners people. Again, they purpose is the same - to get the most interest and the most money.

Many eBayers have multiple accounts so that they can schill their auctions. This is one reason why researching seller history is important on ebay.

89911 · 09-01-2007, 12:46 PM

Shill bidding. For a definition, see Barret-Jackson

competentone · 09-01-2007, 01:20 PM

Quote:

Originally Posted by speedracing944

The old couple bought the house by auction 1 year ago. This place has been up for sale/auction 3 times in 3 years. They bought the house thinking they would be able to sell thier other home on the river very quickly. Thier other house never sold and they put tons of time and money into this farm house. They are going to truly loose thier buts on the deal because the market is real bad here right now. This place sold for $190K 2 years ago and $210K last year and now they can't even get people to offer $165K for the place.

I feel less sympathy for the "old couple" then when I read your first post -- it sounds like they were "speculating" in the "hot" real estate market and got burned.

The auctioneer still sounds like a jerk.

The auction probably should have started with an opening bid of about $20,000 -- that would have caused everyone's adrenaline to start pumping as they all jumped on the bid thinking that they might get themselves a fantastic deal.

Porsche-O-Phile · Porsche-O-Phile's Garage

Unethical/sleazy behavior in residential real estate?!?! You don't say!

The horror! Perish the thought!

speedracing944 · speedracing944's Garage

The price was $1000 up front from the sellers AND a 5% buyers fee.

the · 09-01-2007, 03:04 PM

I would think that most states have some law that shill bidding would fall under. It is deception/fraud/unfair business practice, etc.

competentone · 09-01-2007, 03:06 PM

Quote:

Originally Posted by speedracing944

The price was $1000 up front from the sellers AND a 5% buyers fee.

If the auctioneer paid for any advertising preceding the auction, he might not have made any money from the deal.

How did you learn about the sale? Was it an advertisement?

A thousand dollars won't get you much advertising in most markets.

TerryH · TerryH's Garage

The auctioneer owes them $165K minus commission.

Danny_Ocean · 09-01-2007, 10:49 PM

Quote:

Originally Posted by scottmandue

Hmmmmm... last time I was in Milwaukee I liked it alot, maybe I should consider a move.

Yeah...move there in December.

scottbombedout · 09-02-2007, 12:20 PM

Quote:

Originally Posted by speedracing944

The old couple bought the house by auction 1 year ago. This place has been up for sale/auction 3 times in 3 years. They bought the house thinking they would be able to sell thier other home on the river very quickly. Thier other house never sold and they put tons of time and money into this farm house. They are going to truly loose thier buts on the deal because the market is real bad here right now. This place sold for $190K 2 years ago and $210K last year and now they can't even get people to offer $165K for the place.

Speedy

You sure its not the house from Amityville??

Scooter · 09-02-2007, 12:42 PM

Quote:

Originally Posted by speedracing944

The old couple bought the house by auction 1 year ago. This place has been up for sale/auction 3 times in 3 years. They bought the house thinking they would be able to sell thier other home on the river very quickly. Thier other house never sold and they put tons of time and money into this farm house.

This does not sound like real estate speculation. It sounds like they wanted to move to the farm house, but were unable to sell their other house on the river, therefore not able to move.

I don't see these people as bad people or "real estate speculators."

Porsche-O-Phile · Porsche-O-Phile's Garage

They bought before their other place was sold. Not the smartest move in the book. . .

dad911 · 09-02-2007, 02:28 PM

Sellers probably wouldn't have let it go for $165k anyway. Sellers probably had a minimum value set. Don't feel sorry for them.

Seems like most of the attendees were tire kickers anyway, not interested in buying.

All of the RE auctions I have been to, only 2 or 3 people/bidders are serious about buying. Most own property near-by, and are curious.

If you have serious interest in the property, now is the time to approach the owners, with a no-contingency quick closing deal, and save the buyers premium.