The public sales market is one of the fastest developing sectors nowadays. But there are inevitably mistakes in transparent auctions as well, which leads to disputes. What are the common mistakes and how does the system fix itself?
It is commonly known that feedback is an inevitable final stage of a good system. It allows you to assess your own actions, make conclusions and increase your effectiveness. With ProZorro.Sale we created this mechanism from the very start in the form of Commission on Review of Complaints and Suggestions under DGF (hereinafter – Commission) which is comprised of representatives of the Fund, TI Ukraine and ProZorro.Sale project office. I will briefly explain what the Commission does and what typical mistakes you can identify right now. If buyers can avoid making the same mistake all over again, the work with public auctions will be much more effective.
Without further ado, here are top 5 mistakes identified by the Review Commission.
Mistake 1. “We Didn’t Know.”
Buyers are often too lazy to find out full information on the lot before starting to bid. As the result, they find out everything after they have purchased the lot. And here they discover something unexpected. But they cannot change their mind, otherwise they will lose the guarantee deposit.
Since part of the credit data is considered bank secrecy and is protected by the law, all the details cannot be publicly available (in the announcement on the website). However, this information is available in the data room. To receive it, you need to sign the NDA and attend the room in question in the bank which sells the lot or, for certain expensive lots, online. This information is available, too, you just need to take certain action to access it. Those who are lazy to take this action are in for surprises, of course.
How you can avoid it: it is the buyer’s responsibility to collect information about the lot and assess risks, so study the details everywhere: in the announcement, in the data room and in all the other available information resources.
Mistake 2. “I’m Afraid to Pay.”
There are situations when the buyer fails to pay for the lot despite winning the auction. It happens because they have found out something new about the lot or have identified some obstacles. No matter the reason, they lose the guarantee deposit.
The thing is, the buyer’s guarantee deposit is a way to ensure that the buyer will fulfill absolutely all obligations associated with participation in an auction, including obligations on signing the protocol, paying for the lot and conclusion of a purchase agreement/assignment of claim. It is the only way to ensure the buyer’s compliance. Therefore, it makes no difference which obligation you fail to fulfill, you will still lose the guarantee deposit.
How you can avoid it: read the current version of Procedure of Work of the Electronic Trade System for the auction (“English” or “Dutch”) carefully on the website in the section “Asset Sale Procedure” and fulfill all your obligations regardless of the situation. In this case you will be able to dispute unfair actions, but if you violate any terms yourself, there is no chance.
Mistake 3. “It Was an Accident.”
Buyers often try to dispute their ow actions. For instance, we did not want to stop the Dutch auction at this price, we wanted to stop it at a lower one. Sorry, a mishap. Well, we are sorry, too: if you participate in an auction where pressing a button leads to an actual result, please make sure you press it at the right time.
These mistakes are impossible to explain away by third party wrongdoings, extraordinary circumstances etc. If somebody set the price to UAH 7 mln instead of UAH 700,000 – that’s on you. If you believe it is the system’s or the platform’s fault, it is easy to verify. But who made you count the zeroes wrong?
How you can avoid it: prepare for the auction thinking of the lowest and highest prices that are acceptable for you. Select people who are capable of withstanding the entire nerve-wrecking experience of the auction. The system allocates minutes, not seconds for your bid, so calmly enter the amount and check it again.
Mistake 4. “I Wanted to Buy It but Paid It Off Instead”
A specific example here: a borrower participated in the auction selling their own loan entering incorrect data at the stage of registration (saying they were not the borrower). They won the auction, but when it turned out they tried to buy their own loan, the money counted as a loan payment instead.
A different situation: a borrowed asked a friend to buy their loan at an auction. The friend won, but the borrower paid for the lot from their own bank account. The same thing happened.
How you can avoid it: comply with auction rules and do not lie when you fill in the data: the truth will come to light one way or another. Before you participate in an auction, speak with the consultant of your platform, who will be able to advise you on the easiest and safest way to participate.
Mistake 5. Registration Errors.
Even small discrepancies in formal paperwork may lead to sad consequences. Mistakes in company name, buyer name (any data entered in auction registration process) can lead to the buyer losing the purchased lot plus the guarantee deposit. Sad as it is, the rules are the same for everyone.
How you can avoid it: make sure you enter correct data consistent with your registration documents. Check it twice.
We have small-scale privatization, land lease and wood sales ahead of us. The scope grows, new procedures are added, so the commission will have quite a lot of work. But awareness of typical mistakes and attention to the rules will help everyone to get the most use out of transparent sales.