Underquoting + dodgy auction can be recipe for disaster for purchaser.
I went to an auction few months ago in western Sydney. Agent listed/marketed property $450K+ and had about 8-10 registered bidder.
So here is what happened.
Auctioneer started bidding from $500K
Bidder A placed a bid for $525K
Bidder B placed a bid for $530K
Bidder A, $540K
Bidder B, $541K
Bidder A, $545K
Auctioneer waited for Bidder B to place a bid,
Then announced that they will seek instruction from vendor and comes back after couple of minutes,
informs crowd that Property will be PI if they cant get any further bid
Bidder A bids $550k
Auctioneer waited for Bidder B to place a bid again,
Bidder B smelt the rats and told agent that he is not going to bid anymore as he doesn't think Bidder A is genuine bidder.
Auctioneer/agent talks to vendor and property was passed in.
In normal case, Bidder A will discuss or show interest to try and negotiate with vendor/agent to secure the property that he was really really interested.
nahh...no way.... as soon as property passed in, Bidder A didn't wait and quickly left property.
I thought Auction was rigged and Bidder A was installed for shell bidding.
Most investors know rough price guide before they attend auction, but first home buyers and Owner occupied buyers get stung by such practice and loose lot of money.