07 Apr Who benefits from Buying and Selling at Auction?
Contrary to the popular belief, the auction process is often mutually beneficial to both the sellers AND the buyers. A reminder came up on one of my social media feeds recently, showing a Dutton Park auction I had conducted.
The home was quite unique. We had many groups of people through and therefore, heaps of registered bidders. Subsequently, it sold over the reserve price. But the reality is, it’s rarely that easy! More often than not, there are usually plenty of long awkward pauses, reluctant bidders and a final negotiation before (if at all) the property goes on the market for sale.
Combine this with regular press updates about low auction clearance rates – it begs the question: why would anyone take their home to auction unless they were absolutely certain it was going to be “one of those” properties?
When is an auction campaign effective?
The top agents in our industry are not aligned to any particular method of sale, rather we assess each individual property on its merits and benefits, determine the target market and most importantly, the client’s interests and needs In order to structure a marketing campaign accordingly. That may involve an auction, an advertised for sale price, or an ‘expression of interest’ campaign for some of our high-end properties or development sites.
I frequently sell in the inner-city of Brisbane where I’m consistently dealing with a market where supply is low and demand is high. These are the ideal ingredients for an auction property.The media generally provides an accurate description of auction clearance rates, based on the data collated at the end of Saturdays. But what isn’t reported and what should ultimately be measured is the complete clearance rate for properties that sell before, during and shortly after an auction campaign. This is by far a more relevant statistic, particularly when it is measured up with the clearance rates of properties advertised with a price or ‘by negotiation’.
Furthermore, if the media narrowed down its assessment of auction success to the inner-city ring (7klm), then you would find the clearance rates would be very high. Instead, it bundles all Brisbane region markets into one, when statistically properties in the outer-suburbs have a longer time on market and therefore, the data on ALL sales methods are effected.
What do buyers need to know about the auction process?
In our business, month-in month-out, we see properties that are taken to auction and sold for more money in a shorter period of time, than properties sold by the traditional method of an advertised price sale. Whether an irresistible offer comes in the first week or whether it takes some time to negotiate with the interested buyers after the event, we find that the auction method is proving the best way to attract the right buyers and create a competitive environment from which they can secure their new home. But, like I said, it’s not just the sellers that benefit from this process!
Buyers are often scared to bid at auction and think it’s all about the sellers getting a crazy price by people getting carried away. And that sometimes happens. We’ve all seen it on TV and we may have even been at such an auction. What people promptly forget is that most often when an auction sells above the reserve or for a perceived ‘premium price’, it’s because two or three people all wanted to buy it and one of them edges out the rest, usually by just $1,000 or even $500! There could be no better gauge of market value than when more than one buyer sees value at a certain level.
A buyer’s fear of overpaying could be far easier realised if they were to enter a behind-closed-doors multiple-offer negotiation where they have no idea what the other buyers are offering. For buyers, the auction process is an open forum where they can clearly see what other people are bidding and make an informed decision. As for my Dutton Park auction, well if they were all like that I would have retired long ago! But I remain passionate and committed to the auction process for the right properties and the right reasons, because it produces a better result for both sides in a shorter period of time.