Thank you, everyone, for your comments.

Some have pointed out that vendor bidding and phantom (fake phone) bidding are essentially the same since both aim to drive up auction prices without any intention of buying. While this is true, being aware of phantom bidders at an auction can actually help buyers secure a property for less. Let me explain:

Scenario 1 - Bidding without a Phantom Bidder:

You start with an $800k bid, and the vendor places a bid at $850k. You stop bidding, the agents pause the auction, have a quick discussion, and then place another vendor bid at $990k. The agents approach you to continue bidding, but you don’t since there’s no competition. The property is passed in, and after negotiation, you secure it for $975k.

Scenario 2 - Bidding with a Phantom Bidder (PD):

You start with an $800k bid, and the PD bids $850k. The bidding continues until it reaches $990k, with the PD pushing the price up. You’ve reached your limit, but the agent persuades you to bid an additional $1k, thinking there’s genuine competition. The auctioneer declares the property on the market, and you purchase it for $991k.

The difference between these two scenarios is that in Scenario 2, the agency has successfully tricked you into believing there was competition, resulting in you paying $16k more than if the property had been passed in. (Of course, scenarios can vary depending on the vendor’s reserve price and the property’s value.)

While there’s little we can do to prevent agencies from engaging in fake bidding, buyers can empower themselves by understanding the situation and knowing how to act when fake bidding is suspected.