Circumstances bring about change and we need to be ready to adapt!

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Author and coach John C Maxwell says change is inevitable, growth is optional.

He’s right – how you react to change is important. Will you ignore it and hope it goes away, will you embrace it and go forward, will you be dragged kicking and screaming towards a new future?

The story of the Z-Boys, a surf team who revolutionised the sport of skateboarding in the 1970s, highlighted the importance of adapting to change to me.

They brought surfing’s style to skating, skating low, riding like they were on a wave and dragging their hands on the pavement – a big difference from the upright style of skating that had been popular. They starting competing, and while the traditional skateboarders were not impressed, crowds loved them. The old style soon disappeared as people embraced something new and exciting. Traditional skaters had to adapt or risk losing competitions.

Circumstances brought about another change. A major drought in southern California saw swimming pools drained and left empty. The Z-Boys started skating in the pools, leading to the first aerial manoeuvre and the birth of vertical skating – this revolutionised skating and formed the foundation of many extreme sports, like snowboarding.

The traditional realm of auctions is undergoing a similar revolution. Auctions are great and they get results, but one day an agent said: how can we make auctions more accessible, how can we get more buyers involved and get a better result for our clients. Subject to finance auctions were born.

They were new, they were different, and they were a little bit scary. I have to admit I initially had my doubts. I was worried they were fraught with danger, with ramifications for buyers and sellers.
But, like successful skaters in the 70s, I looked into the new style. I saw it had huge benefits for buyers, sellers and agents and was the way forward. The Z-Boys didn’t ruin skating when they applied their surfing skills, they added something new and exciting, increasing interest and making the sport better and more appealing.

Similarly with auctions, there is still a place for traditional cash unconditional auctions, but subject to finance auctions are adding a new dimension, bringing auctions to a wider market.
From an initial doubter, I’ve become a believer. Let me show you how they can work for you.

HOW KODAK FAILED, A LESSON IN FAILING TO SEE THE OPPORTUNITY

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“There are plenty of obstacles in your path. Don’t allow yourself to become one of them.” Ralph Marston.

The truth is, sometimes we are our own worst enemy. Sometimes success stares us in the face, but we don’t reach out and grab it.  Maybe we’re scared of change, maybe we don’t recognise the opportunity, maybe we simply think we don’t need to change.

Kodak is a fantastic example of failing to see an opportunity and thinking that there was no need to change.

You might be surprised to know that a Kodak engineer invented the first digital camera in 1975, yet now, Kodak isn’t a name you associate with digital cameras.  In fact, younger generations probably don’t recognise the name at all.

Kodak was in the film business, but digital cameras didn’t use film, and apparently management’s reaction to the invention was “that’s cute – but don’t tell anyone about it”.

Even when a study in the early 1980s pointed out that digital cameras could replace film, Kodak weren’t worried as the same study showed that it would take time for this to occur and they had about 10 years to prepare for the change.

But they didn’t prepare. Interestingly, they did develop a digital camera that still used film. It didn’t succeed in the market place – after all, why would you buy a digital camera but still pay for film and the printed photos? They clung to their film business and in the meantime the rest of the world passed them by.

I see parallels with auctions and the WA property market.  About 80-90 percent of inner-city Melbourne properties sell by auction, yet across Perth that figure is a tiny 2-3 percent.

The statistics show they sell properties faster on average – days on market for private treaty for the three months to February 2017 was 75 (REIWA), days on market for auctions was 28 (ASWA).

WA has even broken with auction tradition and introduced subject to finance auctions to bring auctions to a wider market, further improving results for sellers.

Yet despite evidence of their success, agents aren’t grasping this opportunity to get the best results for their clients, in a shorter time frame. And as agents, faster sales, at potentially better prices, are good for us too.

Like Kodak, maybe we don’t see a reason to change, to embrace something different. Maybe we don’t see auctions as a ‘threat’ to private treaty, maybe we don’t see the opportunity they offer.

However, as Henry Ford said “If you always do what you’ve always done, you’ll always get what you’ve always got.” If you want more, why not try auctions.

WHY YOU SHOULD NOT CANCEL THE AUCTION?

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You’ve decided to sell by auction, but as you get closer to the big day, nothing seems to be happening.  The buyers aren’t coming out of the woodwork, so should you cancel the auction?

This is the last thing you want to do, and there are many reasons why.

A quiet campaign doesn’t mean there is no interest

These days, with the internet, a lot of information is readily available for buyers.  They don’t need to contact the agent, and they may not feel the need to visit the property.  If your campaign is quiet is doesn’t necessarily mean there is no interest in the property and there won’t be buyers at the auction. A lot of buyers do their research beforehand but will still turn up on the day.

You might miss out on unexpected opportunities

Auction day can be incredible, and you can get many new buyers attend the auction because of the spectacle and end up buying the property.

We have called many auctions where buyers have turned up out of the blue on the day and the property has sold. They’ve been walking or driving past and the auction catches their eye. While this does not happen in every case, you will miss this potential opportunity if you cancel the auction.

You don’t create competitive environments

The benefit of selling buy auction is that you create several competitive environments among buyers.

Before the auction interested buyers can make an offer.  These generally have to be cash unconditional offers, which is preferable for the seller.  The chance of missing out to another buyer at the auction encourages them to make their pre-auction offer very attractive.

If you decide to continue on to the auction you may then have competition between cash buyers to buy under the hammer.  These days you may also have competition between subject to finance buyers.  This competitive environment again encourages them to make their bids better if they want to buy the property.

Should the property be passed in, you will again have competition between unsuccessful bidders and also any potential buyers who weren’t in a position to bid. They may be subject to finance or subject to sale buyers.  Again they will want to present their best offer in order to outdo the other buyers.

Without this competition, there is no motivation for buyers to present their strongest offer, they can offer what they want, often this is well below the asking price in the hope of getting a cheeky bargain.

You have nothing to lose

You have already invested money in the marketing campaign and in the auctioneer, why would you waste that? You have nothing to lose by seeing the campaign through to the end.

If you are worried that the property won’t sell, what are you expecting will happen if you cancel?

You are sending the wrong message to potential buyers

Cancelling an auction tells buyers that you don’t expect the property to sell, that there are no buyers. The aim of an auction is to get the seller the best price the market will pay, but when you cancel you give the control back to the buyer. They may still be interested in your property, but they won’t be offering you their best price, they’ll be expecting to get a bargain from a seller who is desperate.

You will lose momentum

It takes time to build momentum during a marketing campaign. Cancelling your auction and then putting the property on the market by private treaty effectively puts you back at step one. You will also have lost any sense of urgency created having an auction date creates.

You are losing a valuable resource

Perhaps there aren’t a lot of bidders at the auction, maybe there is only one, and their bid is low. There is no need to panic, your auctioneer is effectively a third party negotiator, someone who is there to promote the property and protect its integrity.

They can use vendor bids to show potential buyers where the property sits.  Should it be passed in, any bidders and other buyers waiting for the property to make an offer in will know what is expected.

Overall, it’s important to remember that selling by auction is a process, and is not just about the auction day.

The benefit of selling by auction is that you are using a short, sharp marketing campaign with a deadline to get more people to the property and create competitive environments before, during and after the auction. The auction itself is only one part of a several-week strategy.

While it is easy to get caught up in the hype about high clearance rates from the Eastern States, and panic that your property might not sell under the hammer, the reality is that here in WA most properties do not sell on the day. Some sell before, some sell under the hammer and most sell after.

Unless you have decided accept a fantastic offer in the lead up to the auction, cancelling the auction is not in your best interests and may harm your chances of getting the best price the market will pay in a reasonable time frame.

Feedback the key to setting the reserve

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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 […]

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Passed in is not a dirty word!

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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.