Auctioneers speak out on allegations

08 Mar 2012

Allegations of unethical practices by a leading SA auctioneer have created the impression that such practices are widespread in the auction world.

Allegations of unethical practices by a leading SA auctioneer have created the impression that such practices are widespread in the auction world. This, however, is very far from being the case, says Tanya Jovanovski, principal of Rawson Auctions Western Cape franchise.

This, however, is very far from being the case, says Tanya Jovanovski, principal of Rawson Auctions Western Cape franchise.

She explains that all bidders or potential bidders who come to a Rawson auction (which is usually held on site) are required to register at the outset and the registration list is always available for inspection.

When a buyer asks what the reserve price is, she will always reveal it, she says.

“I firmly believe that it is in both the buyer’s and the seller’s interest to know what the reserve price is.”

She explains that she also accepts that it is the auctioneer’s duty to justify all prices to sellers and buyers by being able to compare them with those of similar properties sold in the area.

If an open, transparent bidding process is adopted, almost invariably results in a true market-related price being achieved.

“Auctions set a definite sale date and therefore force those interested to make a decision.”

Properties or goods sold on auction are well advertised and attract attention, she says.

Jovanovski says if her team is given a pre-auction offer they will, as required by law, always submit it to the seller for consideration even if it is below the reserve price.

They will also advise on the chances of getting a better offer.

Asked for a general comment on the way in which auctions are run, Jovanovski says her one complaint is that some – not all – of those responsible for the issuing of auction mandates, especially liquidators and attorneys, appear to be part of a closed shop setup into which it is very difficult for a newcomer to break.

“Whether this closed shop is supported by incentive or kickback payments from the preferred auctioneers I do not know, but in light of the recent allegations obviously the question has to be asked.”

Still, she says the good news is that auctions are now accepted as part of the property marketing world and this year her team is budgeting for a significant increase in turnover.

This could in part be due to the perception that, as members of the Rawson Group they are obliged to abide by a strict code of ethics drawn up by the Rawson directorate, she says.

A very common cause of complaint in auctions concerns the practice of under-quoting the value of the property in its advertising in order to attract buyers to the auction.

The expectation being that the auctioneer's skill and/or bids from bogus bidders will raise the bidding to an acceptable level, says Tony Clarke, managing director of Rawson Properties.

A very common cause of complaint in auctions concerns the practice of under-quoting the value of the property in its advertising in order to attract buyers to the auction. Clarke says an example of such advertising wording is "mid R500 000" when the reserve is actually R600 000 or "offers from" or "low R500 000s".

Clarke says an example of such advertising wording is "mid R500 000" when the reserve is actually R600 000 or "offers from" or "low R500 000s".

Clarke says the practice adopted by Rawson Auctions in Cape Town and Gauteng is to advertise the property at the genuine reserve price and not below it.

In Australia, new legislation is likely to be passed soon making it a criminal offence to advertise properties for auctions at a price lower than what the vendor will accept, he says.

“I believe South Africa should adopt a similar legal stance as part of the massive clean-up that the recent incriminatory statements are almost certain to lead to in the auction world,” he says.

Meanwhile, Heinrich Koorts, chief executive officer of Benguela Group and property law expert, says he has noticed that no-one from the auction industry is willing to comment on the allegations levelled against Auction Alliance recently.

Read his comments here.

He recently made a call for liquidators, trustees of deceased estates and banks to revisit their policies around how they apportion work to auction houses.

In light of all of the banks’ (apart from Standard Bank at this point) decision to cease all trading with Auction Alliance, he says to date there has yet been no comment from any auction house, except us.

“The Benguela Group has never condoned the unspoken practice in the industry that sees monies being paid to liquidators, trustees and bank officials are happy to comment on this matter.”

While I am glad that the banks are now coming to the party with investigations, internal audits and so on, the point is that these dealings have been going on for many years.

Now that the media is on board, they are rushing to probe their policies around how auction work was handled.

There should have been questions asked many moons ago as to why 95 percent of the work was going to specific liquidators and auctioneers only.

Auction Alliance was certainly not the only one ‘giving good service’.

Why do banks have hundreds of attorneys on their panel – but only one or two auctioneers?

Surely someone must have wondered or asked why all the work must go to just one or two companies?

This questions the banks’ responsibility towards their clients in mitigating the risk of the client and the bank.

It’s been a “buddy buddy” system and it has not been going on since just yesterday.

“As I said in my previous statement, the banks must not just look at who did wrong – but where it went wrong."

Koorts adds that he lost a R20 million private treaty instruction from a client last week because he was concerned that people would not want to attend an auction, owing to no longer trusting the process of buying on auction.

He says it went wrong in the way the allocation of work was done.

The policies brought about what happened, where proper checks and balances were not done. If you put all your eggs in one basket, that is what happens.

“There should be a probe into every single auction company which received work from the banks or a liquidator.

“If this shows that a disproportionate amount of work went to certain companies, and the same role-players are involved all the time, there should be a full investigation.”

Now that they have the chance to revise their systems, they must not just shove the so-called ‘culprit’ out of the nest, but ensure that there will be transparency in their systems to benefit service providers, the clients and the banks themselves.

Koorts says there should be an opportunity for smaller companies and a diversity of role-players to apply to get an appointment, as with the attorneys and also there should be transparency when these appointments are made.

“The Benguela Group to date has taken only private instructions, since it has not been able to get onto corporate banks’ panels, despite numerous attempts to do so.”

However, he says they are also getting fall-out from this.

Koorts adds that he lost a R20 million private treaty instruction from a client last week because he was concerned that people would not want to attend an auction, owing to no longer trusting the process of buying on auction.

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