Are conditional auctions possible?

Can you hold a conditional auction?

Well, yes, but why would you want to?

Every auction is different, at times, we are running high with multiple registered bidders and at other times, we are dealing with a crowd of conditional or ’non auction’ buyers. It's paramount to recognise that the reason we have buyers wanting to purchase is due to the deadline that the auction process dictates, without it, we would have little structure to the desired timeline.

An auction buyer or what we often refer to as a ‘cash buyer’ can act swiftly, often without the inclusion of bank approval and on many occasions, limited other conditions that could net be fulfilled by auction day such as a building and pest inspection or similar. Conversely, the conditional buyer is not afforded the same transactional agility. Whilst the finance landscape is changing and again favouring our buyers, there are still hoops that must be jumped through and various issued to be navigated. If a conditional buyer discovers the property early in the campaign, it is entirely feasible that all matters including bank finance and bidding approval may be in place before auction day. In the event that a keen buyer has not been able to gain approval to bid with guaranteed finance, it can stay auction proceedings at times or leave them feeling like second class buyers as the cashed up purchasers fight it out. Most vendors will negotiate to secure an unconditional contract rather than endure the uncertain wait on the conditional buyer.

This brings us to the quandary of a property that has attracted only conditional buyers and this can happen intermittently. It needn’t be ‘game over’ for the auction process in fact, far from it. I have been the appointed auctioneer on enough conditional auctions to know that as a plan ‘B’, it can still yield a favourable result. What we recognise in this scenario is that whilst conditions remain, the most powerful friend to best results also exists - competition. Simply, the cooling off period can be removed, a strict condition offered to all buyers can be announced ands the auction can proceed. For example, the vendor may allow the agent and auctioneer to afford all parties a 7 day finance or building and pest inspection as part of the contract. In this case, buyers still benefit from a transparent process that can prove a fair market value with willing buyers and secure the property.

It’s not a text book auction but still benefits from urgency, competition and social proof.

Price, emotions & a good novel

Price can be the biggest deterrent for a potential buyer wanting to purchase. If the price is seemingly to high, the likely buyer may not even inspect. A better process to follow is simply to remove the price form the equation and let the buyers firstly understand how the home may best suit their needs before discounting it because the fail to see value at the sellers initial range.

Auctioneer and real estate trainer - David Holmes, gives compelling reasons why you should auction your home.

One for the money! - One bidder auctions?

It’s a question that I often get asked - am I able to conduct an auction with just one bidder?

The reality is this: At times, there may be a shallow pool of buyers for any property.  Whether it’s the location, price, or general suitability, the reality is that there are not always multiple buyers for a property on a given day.  Sometimes, there is only one buyer willing to part with their hard-earned for the home.  

The auction process when followed accurately, provides a deadline.  If they have interest in the property, can buy at auction and/or complete prior to auction day, it is best practice to elicit the offer early and commence a negotiation whilst still continuing to market the property.

The auction process dictates an action timeline and if there is one unconditional buyer who can purchase under auction conditions, I will pull every stop to affect the sale.

However, to gauge the effectiveness of my beloved auction process and whether it will benefit or indeed, burden the seller, I need to assess:

  • What has the price feedback been?

  • How many interested parties have you met with to gauge interest?

  • What offers have been made?

  • Has there been a valuation completed?

  • What are the three most recent and comparable sales?

  • Are we reasonably convinced that we have flushed out the best candidate for the property?

There are two potential outcomes when the purse-clutching buyer fronts their potential new home;  either they have enough ‘folding’ to make the transaction or fall short and we are looking to the market for another hopeful.

If I were to simply front the crowd on auction day with one buyer and have them not feel the weight of competition, I may find myself with a low bid and a hard slog to drag any momentum into the auction and indeed, the one buyer to an acceptable level.

This is when I have a direct conversation with the sole purchaser and test the cut of their jib.  If the terms of their offer align reasonably with the sellers expectations, we press forward with some old fashioned argy bargy and unsheathe the biro.  If the expectant purchaser falls short of a reasonable exchange point, the negotiation then widens to include conditional hopefuls into the mix.

Capitalising on the energy in any transaction is key.  Multiple bidders at an auction will create momentum but when you are faced with just a single registration, strategy, care and consideration are needed to drive the outcome.  If we miss the initial deadline of auction day, phase two kicks in.  The crowd and any potential conditional buyers present need to experience the genuine energy and feel motivated to act.  Opportunity to promote and spruik the property is embraced, setting a new swift deadline so registered bidders, hesitant auctions participants and hopeful participants can put their best foot forward.

At the end of the day, my charter is clear - I work tirelessly for the seller to bring them the best offer the market can offer in that window and let them make an informed decision.