I know that sounds a little dramatic but you get the point – the process of auction is certain at a point in the market when an appraisal price can be less than certain.
We are at an interesting time in the market. I had a principal tell me at the end of last week that when assisting his staff to do their listing presentations, he was finding it tricky to suggest a price range anywhere near accurate. He said that around 18 months ago, it was a lot simpler with fewer buyers around and those qualified just looking for bargains.
I couldn’t help but think that this just adds more weight to the very certain process of auction. A correctly executed auction process is an exceptional one that truly exposes the best buyers. With any auction campaign, there are several ways in which the property can sell. The first is offers prior to auction. The owner may consider an offer prior to auction from a buyer who is either very keen to remove the home from the market at their chosen price or who does not have the ability to purchase at auction. At times, in the absence of a good quantity of buyers, this may be acceptable to the seller if the offer is enough. The second way that we can sell is under the hammer. This is the best case scenario when there has been a dynamic campaign, ample interest and a number of registered bidders on the day. For the seller, it means that there is no cooling off or conditions to be met, just that the seller has a solid result. Post auction on the day and even in the few days after an auction, there is often good energy around the process, and buyers who did not have the ability to purchase at auction may now purchase with their conditions applied if the property didn’t sell. Lastly, after the auction, if a result has not been achieved, the property can be marketed at a price under a private treaty method. This is a last resort but can also attract new buyers with conditional interest if the price has been set to meet the market.
Conversely, the property can be marketed under a private treaty process. The questions around this are many at this point in time, as agents may be unable to accurately launch the property at the best point for the market. We understand that every seller has a wish price. This wish price can position the property at, under or over the market price. It limits the ability to gather feedback (such as over an auction campaign) and accurately target the correct market price. It runs the risk of entering the market at the wrong level and going stale, sitting above the market price or alternatively entering the market at below the market interest level and selling below the best possible price.
Quick Case Study — $50k Over Reserve
Last weekend, I called an auction for Kylie Tredrea in Bokarina, a beach side suburb on the Sunshine Coast. The sellers were initially hesitant about the auction process but took the advice of their professional agent. Throughout the campaign, there was great interest generated by the agent and some offers prior were submitted but advice was given to see the campaign through in order to go to auction. I attended the strategy set meeting with the agent and client and we left with a reserve set at $450k. This was slightly less than the highest offer but also gave the sellers the ability to potentially realise an unconditional sale under the hammer. On auction day, there were 10 registered bidders and a crowd of around 50 people. The result achieved on the day was an unconditional sale under the hammer at $500k – $50k over the reserve. The highest offer prior to auction was $465k. If the seller had taken the offer prior with a conditional offer they would have forfeited $35k profit and had an uncertain wait whilst the conditions were fulfilled over the next 14 days. I applaud the agent for her strong advice and flawlessly run campaign but the real heroes in this case study were the sellers who gritted their teeth, believed in their agent and held off until auction day.
My thoughts…win/win situation for all parties!