Property auctions can be a great way for people to buy and sell everything from their homes to offices and commercial buildings. However, there are sometimes concerns around how ethical these investments actually are, with many buyers turning to them as a way to seek out bargains without thinking about the impact it may have on the seller. Whether it’s an auction for property, vehicles, antiques or even a fruit and veg auction, investments need to be ethical to attract and ensure buyers and sellers return.
Boost the Auction Industry
Ethical conduct is non-negotiable in the auction industry if it hopes to grow as a whole and entice buyers and sellers away from traditional platforms. Along with operational integrity these are essential, according to Joff van Reenen, Director of Public Relations for the SA Institute of Auctioneers.
Sellers need to feel that putting items, properties and more up for auction is safe and a good method of selling, whether properties, vehicles or anything else. For buyers as well, they require transparency and need to be able to trust in the process to make a purchase. If these are both present then auctions will be able to grow.
Below Market Value Sales
One of the main ethical concerns for many surrounding auctions is that they allow below market value sales. For certain items this may not be such a worry, but for properties these can cost into the hundreds of thousands and a sale well below market value could be seen as unethical due to the big financial loss it represents.
However, one of the main reasons sellers use property auctions is to make a quick sale at the risk of selling below market value, so they are aware of the risks. Also, there are measures in place to prevent a property being sold at too low a price as detailed in the next section.
Reserve and Pre-Bids
When selling at an auction, property auctions should allow for pre-bids to help set a reserve price or start with a minimum bid. This allows the seller to decide whether to cancel the sale if they feel it is too low and there will be great risk that their property will sell for well below market value. It is an ethical constraint that helps prevent sellers losing out a lot financiallyand avoid homes selling for incredibly low amounts.
Ethics are important for property auctions otherwise there wouldn’t be as many people moving to this method for selling homes, commercial buildings and more.