Two Pre-Auction Offers and a Brother-in-Law Bidder
Ben is the listing salesperson for a three-bedroom home advertised for auction on Saturday at 11am. On Wednesday he receives two pre-auction offers. Offer A is $910,000 with a 10-working-day finance condition. Offer B is $925,000 unconditional, but the buyer is Ben's brother-in-law. The vendor says: 'Accept B now and cancel the auction - but don't tell the other buyers about the offers, and if anyone asks, say there's no interest yet.' Six parties have registered to bid. One registered bidder asks Ben directly whether any pre-auction offers have been made. The auctioneer is a licensed colleague in the same office. Ben has not disclosed his family connection to the vendor in writing. The vendor also asks Ben to run the auction himself to 'save the fee'.
1. What must Ben do about the two offers and the vendor's instruction to say there are no offers?
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Ben must present both offers to the vendor and take the vendor's written instructions. He cannot say there are no offers when two have been made. If the vendor wants to accept Offer B before the auction, Ben should explain the consequences: the auction may be cancelled or brought forward, and all registered bidders should be notified so they are not misled into preparing for an auction that will not proceed. The agency's multi-offer policy should be followed, and Ben must not disclose the terms of one offer to another buyer without consent.
When the registered bidder asks whether there are offers, Ben can say that offers are being considered and that he cannot disclose confidential details. He must not say 'no interest'. He also must disclose his brother-in-law connection to the vendor in writing before the offer is accepted, so the vendor can decide whether to proceed with independent advice. The vendor's instruction to conceal the offers does not override Ben's duty not to mislead.
2. Can Ben run the auction himself, and what are the rules about vendor bids and the brother-in-law's participation?
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Ben should not run the auction himself in these circumstances. Even if he is licensed to auctioneer, his brother-in-law is a bidder, and the conflict makes it unsafe for Ben to control the process. The licensed colleague should conduct the auction, or another independent auctioneer should be appointed. Ben should disclose the conflict to the vendor and record how it is managed.
If the auction proceeds, vendor bids must be clearly announced as vendor bids. They cannot be used to create a false impression of buyer demand or to push the price artificially. If the reserve is not met, the auctioneer must pass the property in and any negotiation afterwards must be conducted properly. The brother-in-law must be treated like any other bidder, with no access to confidential information and no advantage from his relationship with Ben.
3. What should Ben have done differently before auction day?
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Ben should have disclosed the family connection as soon as he knew his brother-in-law was interested. He should have documented the vendor's instructions on the pre-auction offers, explained the multi-offer process, and ensured all registered bidders were told if the auction was cancelled or brought forward. He should also have arranged an independent auctioneer because of the conflict.
The agency's multi-offer policy should have been followed from the start, and Ben should have kept a written record of offers received and presentations made. The vendor's request to conceal interest should have been refused at the time, with an explanation that misleading buyers can invalidate the process and expose the agency to disciplinary action. Good records and early disclosure would have protected both the vendor and Ben.