In the states, once the purchase agreement is signed, the home goes through inspection at some point before the sale. The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
Right now, in DC metro, all contingencies are being waived, bids are $100k+ over list on moderately priced homes, and the seller is demanding a 2-month free "rent" back from the buyer.
Both my home purchases have waived inspection. The second waived financing contingencies as well. This isn't uncommon, based on what friends and family have done.
But that’s a very well known risk. An agent will have a whole checklist of things to look at before putting a house on the market to minimize that risk. Also, buyers lose at least some money if they back out, there’s a nominal sum put up that you don’t get back if you decide to not buy once the process is started.
Imagine the same level of stress, but you have to guess what the other buyers are bidding. Do you bid low and hope everybody else does? Bid high, but risk overpaying?
Say an auction closes at 5pm Friday... I bod $500k on Wednesday. Somebody bids $501 Friday 4:50. I bid 502... they 503, right up to the last moment.
And if the site is like some online car auctions, any activity in the last 5 minutes extends the auction by another 5 minutes. So, 504... 505... and on up until somebody walks away.
A home purchase is the largest single thing most people will ever buy. It's going to be emotional, even if the buyer manages to stay calm.
No it's not.
- Ghost bidders and staff posing as buyers on auction day aren't uncommon with smaller outfits.
- They can list the property at a range of say 1-1.2M but the reserve on the property might be 1.5M. They waste everyone's time doing this, and you don't know until auction day - and that's only IF the property meets it.
- They will negotiate with buyers after hammer down, technically the "right to negotiate" goes to the highest bidder - however there's no laws, and I've seen every single agency in Melbourne do this - will go around and gauge what people are willing to go up to. They'll then instruct the vendor to accept/not accept an amount. This is why they have multiple staff on auction day.
Typically the auctioneer draws out bids in $10-20k increments, then knocks it down with a "going once, going twice, going three times..." call.
Just before declaring it sold, the agent normally stops, goes inside to consult with the vendor, and if the price is above their reserve price, goes back outside and says "the house is now on the market".
Now the auction gets serious...
Usually another couple of bidders reveal themselves at this stage. The increments can drop to $1k. If there is a battle between the last two or three bidders, the final price can go up another $50-100k or so. Eventually the final bid is locked in with a final call of "going once, going twice, going three times, to the man in the blue shirt."
The winning bidder goes inside with the estate agent, hands over a cheque for 10% of the purchase price, signs the contract part of the Section 32 statement, and is then committed to pay the balance in 60 or 90 days. Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
I bought my house like this, and sold it again 20 years later the same way.
It's a totally predictable, well regulated, very transparent process. The weekend auction results are all published on Monday morning, both for every house, and the aggregate "clearance rates" for sold versus "passed in".
This is so unlike UK, where each sale has a chain of buyers, all "subject to finance", and no certainty or speed!