Sir, The letter from Barry McMahon (May 6th) will find acceptance from some disappointed underbidders at recent auctions.
The Irish Auctioneers & Valuers Institute (IAVI) represents the vast majority of Ireland's qualified auctioneers. The IAVI believes that guideline figures for auctions should be within 10-15 per cent of the intended reserve price. This reflects the fact that actual reserve figures are rarely, if ever, disclosed prior to auction. A successful auction requires not alone the foremost bidder on the day but also a number of other individuals ready, willing and able to bid for the property.
The Institute would, however, be concerned at any evidence of systematic breaches by Member Firms of its recommendation. We are, however, conscious that we are currently operating in an unusually buoyant market, with competition for properties which go to auction being particularly keen in recent months.
There is absolutely no doubt but that demand has exceeded supply in the auction arena, and this difficulty has been exacerbated by the Government's decision to increase by 50 per cent the stamp duty on second hand homes valued at over IR£170,000. This move puts a further blockage on mobility in the market, reducing supply and therefore increasing prices.
Readers should, however, be aware that the primary duty of auctioneers is to secure the best available price for the vendors by whom they are retained. Even if bidding on the day exceeds the guideline price, the auctioneer is legally obliged to recommend withdrawing the property if convinced that by so doing a higher price is likely to result from subsequent negotiations.
In many cases recently the bidding in the auction room has taken the price way beyond the actual reserve on the day clear evidence that it is ultimately buyers/the public who shape the market and price levels, not the vendor and certainly not the auctioneer. The auction process is not one which is curtailed to 20 minutes in an auction room. The actual auction is the culmination of a month long process of marketing, during which any astute auctioneer will adjust anticipated price levels upwards or downwards to reflect feedback from potential buyers. It is, therefore, in the interest of buyers that they maintain contact with auctioneers throughout the marketing period.
It is important to remember also that, whilst the auctioneer may well influence the ultimate reserve price on the day, it is never normally set until the day of the auction. The actual reserve is dictated ultimately by the vendor, who may be overly influenced by market conditions and a perceived high level of interest. Thus, an auctioneer could well genuinely market a property, anticipating a reserve price at a particular level, only to receive instructions from the vendor on the day to dramatically increase the actual reserve price well beyond previously anticipated levels.
Mr. McMahon's criticism of property journalists in this regard is wholly unjustified. Any casual reader of the property pages of The Irish Times and other national newspapers will know that property journalists have indeed addressed this issue in recent times. - Yours, etc
Chief Executive, Irish Auctioneers & Valuers Institute, Merrion Square, Dublin 2.