Sometimes auctions are a hit and miss and owners are a bit skeptical or nervous when they go to auction. Knowing whether you should auction or not is tricky, so here are a few pros and cons to make your decision easier, and give you a lay of the land.
More price potential.
No two properties are exactly the same. Even if the two homes are built side by side, they aren’t exactly the same. So you need to market the property not the price tag and it’s basically being really optimistic when you do go to market. The worst thing you can do or I say is, allow the seller to put a price on the property when you haven’t tried seeing how much the market is willing to pay. Because once you put a price on the property buyers probably wouldn’t be willing to pay higher than the price you put on. It’s very doubtful that there will be competing offers on that property as well.
The second worst thing you can do is put that price tag too high because then you lose all the momentum when you go to market. When you go to market you get a number of groups coming through and giving you feedback that your property is priced too high. That allows you to find a level of what your property is really worth and it also allows competition. A good auction realistically got two bidders or more. And it allows people to really battle it out and competition is what knocks the price of the property up.
We have seen more and more one bidder auctions. Sydney and Melbourne are now getting one bidder auctions, but that still allows them to negotiate a sell on the property. But in an ideal world, you got a number of bidders bidding for your house. It gives transparency to the buyers who are actually seeing whose bidding against them. Sometimes there are people on the phone who are unable to attend the auction so they may have someone bidding on their behalf, be it an agent or friend or family member. But all in all, it gives transparency to buyers and also gives them confidence about seeing other people on the floor who are bidding for the house and that can knock up the price and obviously benefit the owner.
I’ve seen some auctions where the reserve has been in excess of $200,000. The southern states are actually setting much higher reserves. But it’s about realistically setting nice reserves at a certain level and creating that competition. Some people say that we should have reserved. But when I go to an auction I personally wouldn’t set a reserve until very close to the date so wait and see what the market feedback, and what are the offers that you’re getting for the property as well.
Setting a date for the auction.
We’ve had a lot of people sign up to go to the auction but those properties have ended up getting sold and being negotiated within the first week or so. Just because you set an auction date doesn’t necessarily mean you go to auction. But having that date does make those buyers decide and you can cancel the property prior to the auction. And it’s happening a lot at in Brisbane at the moment. You can actually negotiate without a pricing and just try to feel what the buyers are offering.
Auction conditions are unconditional.
When you buy at auction under auction conditions there is no building or pest, there is no finance and you’re waving the 5-day cooling off period and usually, it is 5-10% deposit. So realistically, you can’t get out of that contract. For the sellers, it gives them security now that they are not going to sell it to someone. They then will inspect the building and pests on the house and they come back and say, “Look, there’s all these things that I already knew about or the buyer knew about and trying to negotiate that off the price.” It gives you that unconditional sell and surety to move on to the next phase of your life.
When you take your property to auction it might have a lower price. In the Red suburbs in Brisbane, the buyers might have confidence. But if it’s the first time to buy a property and you’re in the Red suburbs where there are not too many auctions, buyers might not feel confident enough so you got to be marketplace oriented. If the buyers are used to seeing prices or used to seeing price guides and want transparency. You really should take your property to auction in those suburbs. Because in the, it is very auction based and 60-70% of the properties go to auction.
You cannot give a price guide.
People ask a lot about what do you think should we go for, how much? This can be something that frustrates buyers because we can’t give out those guides in Queensland. We can give recent sales in the area and obviously buyers are going to make their own assumptions whether it is better than House A, worse than House B. They are going to work it out themselves. And some people will not tell you how much they are willing to go. Obviously, the buyers are trying to get it first as cheap as possible.
Buyers feigning interest.
I’ve had some auctions where buyers play their cards close to their chest. They will say that they are not interested, and go up on the last day and end up paying a really good price for the property, which makes the owner happy by the way. But that’s also a con because you don’t really know where the buyers really sit because sometimes it’s like playing a game of Chess. They are making their moves right when they have to which is on the auction day.
That’s how to decide whether you should auction your home. Do your research on the market - the best way to sum it up is if you think you’re going to have a lot of interest in your property at a certain level that you’re happy with, and you really want to test the market and see where that can go, go for the auction. If anyone has got any questions, please feel free to drop me a message or call me at 0405 000 219. I’m happy to help out!
BEN WAKELY | 0405 000 219
Bardon Agent of the Year