A dummy bidder is a false bidder. They are used during auctions to create the illusion that there is a lot of interest in a property. Their primary purpose is to get genuine bidders to believe they have to compete in order to secure the property. It is all part of the auction landscape and is used in all kinds of auctions, whether they are cattle or art or furniture, and have been around since the inception of the art of auctioneering. Auctioneers have been described as people who elicit money with their tongues. Legislation to curb dummy bidding has reduced dummy bidding, but it will never be eradicated totally from the auction scene.
Clearly you need to identify any dummy bidder in order to prevent finding yourself in the position of being ‘run-up’ by fictitious bidding or becoming over enthusiastic and bidding more than you really wanted to and more importantly, need to.
One of the best ways to identify a dummy bidder is to watch the agent’s behaviour 20 minutes before the auction. The agent will consult the owner, the owner’s friend’s and the dummy bidder. The dummy bidder will often come up to the auctioneer and seek instructions. It is very obvious when you know what to look for.
It was late on a windy Saturday afternoon during a wet Melbourne winter, and it was the fifth auction of the day. An apartment on the 24th floor of a city building was being auctioned. As the auction was in the unit, there were only 15 people in the crowd. One of them was the dummy bidder. After a quick look around the room, I decided it was going to be the gentleman leaning against the window. He looked totally out of place and clearly had something on his mind. He acted quite nervously and had a distinct frown on his face, standing there with his arms crossed – a sure sign of someone stressed.
I promptly approached him, asking loudly in front of the group: “You’re here on behalf of the vendor, aren’t you?”
A very embarrassed dummy bidder went bright red and left the room. I had hit on the dummy bidder and the auctioneer didn’t have anyone to run the bidding up or, in fact, to offer an opening bid.
The auctioneer called for an opening bid of $850,000. From my position right next to him, I answered, “I can’t see anyone offering you $850,000″, and of course there was no one. As the auctioneer knew me, he succumbed and said, “All right David, I’ll make a bid of $850,000 and take rises of $10,000.” I replied that I would give him a real bid, not a vendor’s bid, of $900,000 – conditional upon no more bids being placed on the vendor’s behalf. If he did not agree to this, I would leave the auction and suggested that others do the same. The auctioneer was cornered. He took the bid with the attached condition and the property was passed in at $900,000. I bought it shortly after for $910,000, $40,000 less than the owner had paid for it two years earlier.
Don’t be afraid to make conditional offers Auctioneers don’t know how to handle them.
Ways to Spot a Dummy Bidder
- Arrive 20 minutes before the auction and see whether any last-minute instructions are being given by the auctioneer or agent.
- Ask. Before the auction starts, go ahead and ask people why they are at the auction and whether they are dummy bidders. Watch for some embarrassed faces.
- Ask the auctioneer (loudly) whether there are any dummy bidders. If the answer is no, ask the vendor.
- Watch the auctioneer. Are bids coming after the auctioneer adjusts their glasses or scratches their nose? See if you can find the pattern.
- Face the crowd. Can you see the bids the auctioneer says they are seeing? Ask the auctioneer to identify the bidder.
- Most genuine bidders bring someone along for moral support, especially if the property is expensive. Suspect those on their own, especially if they seem blasé.
- During the open for inspection, check out family photos on the mantlepiece. On auction day see if any of those familiar faces are among the bidders.
- Raise bids by unusual amounts. If bidding is moving in steps of $5000, try raising the bid by another amount, say $2800. See if the auctioneer can do the maths.
- Suspect those who scrutinise the contract of sale closely. Genuine bidders do that well before the auction.
- Keep an eye out for unfamiliar faces at auctions. You may have been looking at similar properties for months. In that time you will learn to recognise most genuine bidders.
- If a fourth-floor, walk-up apartment is being hotly contested by someone over 60, using a walking stick, chances are they are someone’s parent bidding on behalf of their child.
- Feign a distinct lack of interest when bidding against a dummy bidder. Start shaking your head at the auctioneer when he looks for you to bid. Give him the look that says, “I have just got no further interest,” and look away.
– David Morrell