Southern Highlands Burrawang café ‘reverse auction’ not the first, but still stirring up debate

Southern Highlands Burrawang café ‘reverse auction’ not the first, but still stirring up debate
Southern Highlands Burrawang café ‘reverse auction’ not the first, but still stirring up debate

The historic Burrawang Cafe and Bower Cottage in the Southern Highlands will go to auction on August 26, using a controversial selling method known as the “reverse auction” or “Dutch auction”.

The property, at 11 Hoddle Street in Burrawang, has a starting auction price of $1.68 million and last traded for $690,000 in June 2002, according to RP Data records.

The café has been listed for sale since July last year with an original asking price in excess of $2 million.

It will be reverse auctioned by well-known auctioneer Damien Cooley.

Under a reverse auction, the price starts at market value (set by the vendor) – above the reserve price – and decreases until a bid is placed that is the winning bid. The winning bid is the first bidder to put their hand up.

"As a visual aid there will be a red and green light used at the auction and if a buyer has not put up their card before the price reaches the vendor’s bottom line then a red light will be displayed and the auction will be stopped. While ever the green light is on the property can be bought, " explains Cooley.

The reserve price is not disclosed beforehand and only becomes known once the red light appears.

Cooley says he believes this to be a "really different, exciting and inventive way of marketing a property" and says he is thrilled to join  Mooney and property owner Garry Harding in "performing this unique auction method".

To encourage more people to take part in the auction, Harding, has placed a $10,000 reward payable to anyone who finds the final official buyer.

If no one introduces the buyer then the buyer receives the $10,000 as a rebate off the selling price.

Burrawang Cafe is located in the main street of Burrawang, about 12 minutes to Bowral.

It dates back to the 1860s and has been fully restored.

The café and Bower Cottage (also of 1860s vintage) stand on a half-acre (0.2-hectare) block, and both are currently leased on rolling monthly leases.

Burrawang General Store Cafe is a fully operational 100-seat timber restaurant featuring floodlit barrel ceilings. It is fully licensed and includes a 3,000-bottle cellar, a landscaped and manicured English garden and a separate office.

Bower Cottage is a fully renovated three-bedroom weatherboard home on the same title complete with a promenade balcony and polished floors. It features a living and dining area with garden views, a fireplace with access to an alfresco entertaining area. It also includes a seperate studio.

The property is being sold by Raine & Horne agent Rick Mooney.

Mooney tells Property Observer the vendor has requested a reverse auction, as he believes it will attract more buyers.

“We are confident we will get a lot of enquires and that it’s a good idea."

Mooney says letters have been sent to the NSW Department of Fair Trading and Real Estate Institute of NSW to ensure they are the “front foot” regarding the legalities of this controversial auction technique.

“We want this to be a positive story,” he says.

Christian Payne, president of the REINSW, says that officially the institute has not discussed the auction or taken a view on the methodology.

“It’s certainly been used to sell fish and tulips,” he says, in reference to its use at the Sydney fish markets and the origins of the technique – selling tulips in Holland for over 100 years.

Payne says the current legislation was not written with reverse auctions in mind and says regulatory issues could arise as a result of the Southern Highlands auction.

Speaking in his capacity as a real estate agent and general manager of Payne Pacific Real Estate in Cronulla, Payne says the reverse auction has “question marks all over it”.

His primary concern is that estate agents should be working for the vendor to get the maximum price.

In a traditional auction, Payne says people attending have the opportunity to increase their bid by say a $1,000 before the hammer falls, something that’s not possible under a reverse auction, where the first bid is final.

“Are we getting the maximum price for the vendor?” he asks.

The Burrawang Café is by no means the first reverse auction in Australia.

Alex Bartolo, from Raine & Horne Narre Warren South, tells Property Observer he used reverse auctions successfully up till 2004 for about 12 properties and recalls that about seven or eight of them sold using this technique.

He recalls they attracted a lot of media attention at the time.

Not all of it was positive.

Bartolo was involved with a stoush with REIV chief executive Enzo Raimondo, who was then strongly opposed to what had become commonly known as the “Bartolo auction method”.

Raimondo told the Sunday Age in June 2004 that a reverse auction was “a gimmick and a fad” that Bartolo was using to differentiate himself in a tight market.

“I don't think a reverse auction is in anyone's best interests,” Raimondo says.

He added that Dutch auctions do not contravene the real estate act but only because reverse auctions weren't considered when the legislation was written. It was for conventional auctions.

“But it's not in the spirit of the legislation."

Raimondo declined to comment further on this issue when Property Observer contacted the REIV.

A spokesperson for the institute said it was best left to the REINSW to comment.

Bartolo, though, remains defiant and believes a reverse auction is fairer system than the traditional method because it does not hassle the vendor or purchaser.

He says the REIV view is “old fashioned” and says there are many in the industry who don’t like it when anyone changing the rules.

Bartolo says he has contacted the selling agent and suggested that the auctioneer announce when the reserve price has been met.

“Then bidding can continue and the winner bidder has the first right of refusal,” he says.

Cooley says its the first time he is undertaking a reverse auction.

"We only know of a similar method used many years ago in Victoria so it’s terrific to be apart of it. This method is an effective way of communicating to buyers the owner’s genuine commitment to selling the property so we’re looking forward to receiving a lot of interest on auction day”, he says.

Reverse auctions have been used at the Sydney fish markets since 1989.

At the fish market, the auctioneers set the target price of the fish each morning, based on quality, demand and the previous day's prices. They then add on $3. Prices are displayed on two huge electronic dials that hang from the ceiling; when the selling starts, the clocks count down at a rate of $1 per revolution, the cents racing by like milliseconds on a stopwatch, until the first buyer bids.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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