The integrity of the SLOD! bidding system is what has made it best and fairest real estate sale system ever devised. Its security is derived from a combination of simplicity, the active involvement of the parties, and the transparent linking of each aspect of the transaction. Every transaction is constantly monitored by all participants, with various forms of cross-checking, verification and confirmation.
The "best and fairest"; that's a very big claim isn't it?
Yes, it is a big claim, but one that we can quite easily demonstrate. When both parties to a transaction are able to communicate, to "compare notes" and to look inside the system to see how it works and to monitor it's progress, it is easy for a relationship of mutual trust to develop. And when those parties are able to negotiate through experienced property lawyers, they have the comfort of knowing that the documents they sign will have been properly prepared to reflect the negotiated agreement and to give it sound legal effect.
There are no conflicts of interest, no judgment-clouding commissions and no real estate agents. The SLOD! sale process involves professional property valuation, professional negotiation and professional legal advice.
A fully inclusive bidding procedure ensures that the first priority is always the price a purchaser is prepared to pay. No potential purchaser is eliminated from the sale because they are relying on finance (auctions exclude these purchasers), or because they are not prepared to guess other bids (sale by tender excludes these purchasers), or because they are not permitted to put a price to the vendor without first signing a contract (all real estate agents require purchasers to sign a contract before submitting a bid to a vendor).
What is dummy bidding?
Dummy bidding is the term used to describe a form of criminal fraud that is peculiar to real estate auctions. In short, a dummy bid is a bogus bid, and it relies on 3 factors to work:
- Bidders not registered - If bidders are registered they can be identified. A a registered bidder cannot simply melt into the crowd after the auction has concluded.
- A large enough crowd - Underquoting and other methods are used to attract a crowd at auctions. This helps to create the illusion of interest in the property, even if there are only two genuine bidders. A large crowd also assists, not only in hiding the dummy bidder, but also in allowing the real estate agent to point into the crowd without identifying anyone in particular.
- A confident fraudster - The confident fraudster may be the real estate agent who falsely identifies a bid where there is none, or it may be the dummy bidder who calls out a bid with no intention of buying the property.
The Real Estate Institute of Victoria regarded dummy bidding as an acceptable, albeit illegal, means by which real estate agents could inflate auction prices, and condoned the practice for many years before public anger forced it to change its policy. However, dummy bidding has always been a serious criminal offence - it's proper title in Victoria is Obtaining Financial Advantage By Deception, and it carries a maximum penalty of 10 years' imprisonment. Other states have similar provisions in their criminal statutes.
Because of the above 3 factors, dummy bidding remains a problem with real estate auctions.
(For more information on dummy bidding, see Neil Jenman's article "Inside the Tostevin Scandal")
How does SLOD! deal with the problem of dummy bidding?
First, SLOD! identifies dummy bidding for what it truly is. Dummy bidding is not simply sharp practice on the part of a street-smart real estate agent, nor is it merely a means of getting bidders to the vendor's reserve price (as claimed by the Real Estate Institute of Victoria). It is a serious criminal fraud, a crime, punishable by 10 years' imprisonment. We make it quite clear - any person who attempts to use SLOD! in an effort to trick another person into increasing the price they offer for a property is a criminal, and will be investigated in relation to their criminal conduct.
Second, SLOD! ensures that vendors and purchasers can "compare notes". Potential purchasers are able to have direct contact with the vendor of the property being sold, not only to have access to the person who knows the property best, but also to confirm that the vendor is aware of all offers and the terms of the offers made. Consumers regularly complaint that real estate agents fail to pass offers on to the vendor, or the real estate agent favours one purchaser over another (often an acquaintance or friend of the real estate agent), or the real estate agent refuses to provide sale documents unless the potential purchaser pays money. All of these problems are eliminated when the purchaser is able to communicate with the vendor direct.
Third, SLOD! uses two forms of registration to confirm the bona fides of potential purchasers. The first takes place when the property is inspected. Visitors are required to produce photo ID, not only for security purposes at the time of the inspection, but also to confirm that a person who has registered to bid on SLOD! has also personally attended at the property.
Fourth, SLOD! requires online registration of all bidders. Online bidder registration requires the bidder to provide the following:
- First Name
- Last Name
- Telephone
- Email
- Address
Lawyers Real Estate is notified immediately when a bidder registers, whether or not a bid is submitted at that stage. An quick initial check will reveal any obviously bogus registrations, for example the name "Barak Obama" would immediately arouse suspicion and warrant follow up of the bidder's bona fides.
Fifth, the vendor's lawyer (the Lawyers Real Estate lawyer who is representing the vendor in the sale of the property) will contact at least the 3 latest bidders, and perhaps all bidders, to confirm their bona fides. There are various ways a bidder's bona fides can be confirmed, but the most common is by checking the SLOD! registration details of the bidder against the details provided to the vendor by the bidder at the time the property was inspected. Where the property is vacant land, or where the person bidding was not the person who attended at the property, other methods of cross-checking and confirmation are used.
How many methods are used to confirm that a bidder is genuine?
We have discussed some of our verification methods above, under the heading "How does SLOD! deal with the problem of dummy bidding?", but sometimes it may be necessary to investigate further. The need for further investigation may arise if the bidder cannot be contacted through the telephone number or email address provided despite repeated attempts. Or, further investigation may be needed if the bidder has been contacted, but creates the impression that things are not as they should be.
Obviously bogus bids or bidders
If a bid, or bidder, is obviously bogus (such as someone who pretends to be "Barak Obama" or "Osama Bin Ladin" or a bid that is ridiculously high), we will immediately take action to ensure that bid and bidder are prevented from proceeding any further.
Where it is difficult to determine the bona fides of a bid or bidder
This is best dealt with by way of an example:
Let's assume that a bidder by the name of John Smith, using a Gmail or Hotmail email address, registers as a SLOD! bidder, and submits a bid of $800K on a property with a price range of $570K - $630K. It is possible that the name John Smith is genuine, and that the email address is also genuine. While the amazingly high bid seems rather extraordinary, it is possible that Mr. Smith is so keen to purchase this property that he wants to chase away all competitors with a super knock-out bid.
If the bid is bogus it may create problems by deterring other interested people from participating in the bidding, and spoil the vendor's sale.
After conducting the normal checks (as described above under How does SLOD! deal with the problem of dummy bidding?) the vendor's lawyer proceeds with some further checks.
- The bidder is contacted by telephone - if the he cannot be contacted, the bid is be deleted. (It can be reinstated if confirmed later.)
- The bidder's bid is discussed in detail.
- The bidder is asked to commit to the purchase immediately.
- The bidder is asked to provide the details of his lawyer immediately.
- The bidder is also asked to submit his formal offer through his lawyer.
- The bidder is also asked to pay the deposit by bank cheque immediately upon acceptance of his formal offer.
These strategies allow the vendor's lawyer to confirm the bidder as bona fide or bogus very quickly. A negative response from the bidder to any of these requests may lead to further discussion.
Having the bidder commit to the purchase immediately by submitting his formal offer through his lawyer provides a further method of confirmation, as the lawyer will be asked to confirm her client's ID, to provide legal advice to her client, and to confirm that any "cooling off" period will not apply to the sale.
If the bidder is able to comply with all of these requirements, it is likely that the property will be sold on the same day as the bid was submitted, with the deposit paid in full.
If the bidder is unable to comply with all of these requirements, there may be doubt cost over his bid. It may be necessary to delete his bid, and reinstate it if, and when, he is able to proceed.
(This example is not far-fetched. It is based on our experience with a purchaser who, having become quite wealthy, decided that he wanted to purchase our client's property regardless of price. He made an overwhelming offer that led to the immediate sale of the property. We later discovered that the property had been his childhood home, and he was not prepared to lose it for a second time!)
How are dummy bidders dealt with if they are identified?
We are not quick to judge people, or to accuse anyone of dummy bidding.
Our first priority is to deal with any bid that fails to satisfy our criteria or our initial validity checks. If a bid is identified as doubtful, it will be removed unless and until it has been confirmed as valid. If our investigations confirm that the bid is genuine, it will be reinstated.
However, we will always assume that bidders are acting in good faith, and we will assume that a mistake has been made if a bid is found to be invalid. We realise that anyone can make a mistake when entering a telephone number or email address, or that a vendor may forget to record a visitor's details.
Only in extreme, and very obvious, cases of clear and deliberate wrongful conduct will we conclude that a person is behaving dishonestly. Such matters will be brought to the attention of the police, so that a fair and proper investigation can be undertaken.
What if a bidder suspects that the previous bid is bogus?
All bids are recorded for audit purposes, and the details of bidders are maintained until a formal Contract of Sale of Real Estate has been signed by both parties. If the validity of a bid or bidder is questioned, the matter will be investigated, and records are kept of the investigation.
If a bidder has reasonable grounds for suspecting that a bid or bidder is bogus, we will follow our strict internal procedures in order to determine the bona fides of the bid and/or bidder, and we will advise the complainant of the outcome.
NOTE
The privacy of every bidder is of paramount importance, and information that may be used to identify a bidder will not be provided to anyone but the vendor (on whose behalf such information is collected) and regulatory authorities as may be entitled by law.
For more information on privacy, please see our Privacy Policy.
How long does a bid remain on display?
The life of a bid is not very long. The bid is exposed long enough to allow other potential purchasers to know that someone is interested in purchasing the property, and the amount they are prepared to pay for it. In this way, other potential purchasers can also express interest in the property and all expressions of interest can be dealt with in an orderly manner.
Where only one bid is received
If only one bid is received, it will be displayed while the vendor is consulted and negotiations are commenced with the bidder. If the negotiations fail to take the matter any further, the bid will be deleted.
The bid will remain valid, and on display, until negotiations conclude with the sale of the property or the cancellation of the bid.
Where more than one bid is received
If, while the first bid is displayed, other bids are received they too will be displayed so that all parties can compete. In this case, negotiations may be postponed until a leading bidder emerges.
All bids will remain valid, and on display, until negotiations conclude with the sale of the property or the cancellation of the bids.