Hi °C | Lo °C THE by now famous 2011 photograph shows IMF chief Ajai Chopra en route to the Department of Finance and looking bewildered as he picks his way through a milling crowd of people desperate to get into a capacity filled stressed property sale.
It underlined that even despite property fever bringing the country to its knees, we still couldn't help ourselves when the notion of a bargain presented itself.
Indeed, this year the organisers of that auction, Allsop Space, have announced they are doubling the size of their bidding sessions which have featured stressed bank-sold properties.
The firesale has always been a big feature of a recession and the bigger the recession, the bigger the firesales and the wider their cache.
Woes
They're a focal point for surviving businesses to profit from the woes of the recently deceased by picking up the quality debris for cheap – plant, machinery, furniture, computers, vehicles and even property – all at supposedly below-cost prices.
The perceived wisdom of a firesale is that you'll get the bargain of a lifetime. But the unexpected truth is that if you're not careful, you could end up paying more than "shop" value.
When Rathdown Motors closed its doors in Terenure in December, its remaining vehicles were sold at a jumbo "no reserve" car auction which had hundreds turning up to bid.
Former Rathdown owner Mark Turley observes wryly that many of the buyers present paid more for his vehicles on the day than they would have on the Rathdown Motors forecourt months before the closure.
"I think it's ironic that many of the cars had been sitting on the forecourt with little or no interest in them and that if the buyers at auction had come to our dealership six months earlier they could have actually got the cars cheaper or for much the same price.
"And they could have left with a full warranty to boot. You have to wonder what the logic is in that?"
Merlin's managing director David Byrne, who conducted the auction, adds: "This seems to be a particular feature of a "no reserve" car auction. Once it's clear that everything must sell, buyers pack the place out and the hysteria kicks in.
"It doesn't happen at our regular car auctions. Everyone's focus goes on one vehicle and they start to compete against one another. It gets to the point where they end up bidding because they don't want to lose out to the other guy."
Mr Byrne estimates that around a quarter of the vehicles he sells at "no reserve" auctions change hands for well above their regular private market or forecourt value.
And it's not just car firesales. Last spring, heavy plant auctioneer Ganly Craigie had more than a thousand foreign buyers travel to Ireland for its April 2012 auction of stressed plant and machinery.
At the time the company estimated that almost 700 units were sold at prices of around one-third of their market value.
However, things have changed markedly since then. Now the company says there is actually a shortage of construction plant available in Ireland, to the extent that prices are now strengthening.
However, buyers are still in firesale mode.
Ganly Craigie boss Robert Mead says: "If I had a CAT 740 dump truck or a Volvo A40 of 2007 vintage that I sold in 2009, I'd get the same price for them today. That's a real increase when you consider three years of depreciation."
He reports that frenzied bidding often sees machines go above standard forecourt value, although he declines to estimate what percentage.
Alan Brennan runs the Dublin office of DAAN, the Europe-wide online auction house which specialises in clearing old stock for retailers and selling liquidation assets on behalf of banks and liquidators.
Market value
"Most of our stock seems to sell for around 30pc of market value and you're on very good ground if you're looking for office desks and chairs which can go for 10pc of shop value, but when it comes to designer and branded items and popular technology especially, the prices regularly go well over.
"We sell used iPads and iPhones here for better prices than Apple gets for the new ones in shops.
"Most of these products come pretty close to market value – but remember that they are sold "as is" and without any promises or warranties. I'd say about 25pc of those sales go way over regular shop price."
"What usually happens is that the bidding wars start only in the last few minutes and they're ferocious. The vast majority of the price is added in that small window."
So what about the bargain bricks and mortar at the type of "monster" property sale which perplexed Mr Chopra?
Surely the property buyers at the well-known Allsop Space auctions have been getting a bargain given that property prices have been in the dirt for the last three years?
Not always, says Allsop Space's Robert Hoban, who claims that a substantial portion of the 777 properties sold in the company's nine auctions have changed hands for considerably more than their private treaty value – many after being on the market for protracted periods at lower prices.
"I'd say half of our city properties go for between 5pc and 30pc more than private treaty." Like Mr Byrne, he cites the competitive nature of auction fever.
There's 47 Leinster Road which languished unsold on the private treaty market with a price of €500,000. Then it went to auction in December and was sold by Allsop Space for €530,000.
Then there's the house at 23 Northumberland Road in Dublin 4 which was bought by private treaty for €550,000 in July 2012 and then sold on in an auction in October for €685,000, earning the savvy "flipper" €130,000 into the "bargain".
It's why the smart cases tend to send a solicitor or a representative along to the firesale auction.
For safety then, would we be safer bidding for stressed items on eBay where you're not in the company of competing bidders and where you can safely fix your maximum final bid in advance?
Well, apparently not.
Aggressive bidders
Once again, aggressive bidders can't help themselves from turning it into a competition. eBay statistics recently reported by the BBC state that around 50pc of eBay auctions result in higher sales prices than the "buy it now" prices previously listed.
It means buyers would more likely get the product cheaper if they bought it at the listed price before the auction.
Research on computer bidding from Princeton University shows that people who believed they were bidding against a "robot" tended to bid rationally, but that once they believed a human was behind the bid, the rules went out the window and they couldn't help competing . . . and in the end, paying out more.
What all of the above means is that if you don't know your market values and exercise restraint, you'll get more than you bargained for from your firesale – you'll get well and truly burned.
Irish Independent
