As an auctioneer I’m often asked how the reserve price is set. A common misconception is that it’s a bit of guess work “I think we can get $720,000 for it”, or even that it’s based on what the seller wants – “ I want to get $650,000 for the house and I want an […]
When it comes to auctions one of people’s greatest fears is that their property won’t sell, but not selling under the hammer doesn’t mean the auction is a failure.
The market place tends to worry about properties being passed in, but this is really just another stage of the auction process.
An auction aims to get the best possible price in the shortest possible time and sometimes the sale occurs after the auction. For example, auctions are designed to attract buyers and encourage them to act, but not all buyers are in a position to bid on auction day.
They may be a subject to finance buyer, or a subject to sale buyer. They can be genuinely interested in the property and want to make an offer, but cannot bid under auction conditions. These buyers are actually waiting and hoping that the property will be passed in at the auction so that they can have the opportunity to buy.
There will even be auctions where there are no actual bidders, but several ‘subject to’ buyers waiting in the wings to compete for the property. In many instances, when a property is passed it, it will sell soon after the auction.
Knowing what to expect at the auction can often relieve some of the concern sellers feel.
A good agent will gather feedback during the campaign and let the seller know if any bidders are expected at the auction or if interested buyers are likely to be subject to finance or subject to sale.
Similarly a good agent will encourage all interested buyers to attend the auction. If the property is passed in on a buyer bid, the agent will negotiate with the highest bidder, but if the property is passed in on a vendor bid, all buyers can have the chance to put in an offer. If a buyer is not present, they will miss the chance to secure the property for themselves.
I also think it’s important to understand the market statistics.
We can get carried away by hearing about high clearance rates, particularly in the eastern states, and people often think clearance rates refer to those properties sold under the hammer. However they can include those properties sold before the auction, sold under the hammer and those that have been passed in and sold within 24 hours.
If possible, agents should provide sellers with a break-down of statistics, for example the weekly CoreLogic RP Data statistics list how many properties are sold prior, under the hammer, or just after the auction, They also list how many are passed in and withdrawn each week, and give details of the individual properties that have been reported to them.
Where an agency does a lot of auctions, or can access the relevant information, it is also useful to give the seller information on passed in properties and when they sell. Many properties sell within days of the auction, or generally an offer is received and accepted within a week or two of the auction.
The key is to ensure sellers are well briefed throughout the campaign so that they have realistic expectations for the auction and will not be disappointed is the property is passed in.
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