THE PROS AND CONS OF SELLING USING THE AUCTION PROCESS
There is so much fear and confusion around Auctioning properties from buyers and sellers. This is despite the popularity of a number of TV shows that showcase auctions regularly. In layman’s terms Auction, just like Private Treaty, is a process to sell a property. The major difference to private treaty on the surface is that there is no price placed on the property, instead, the price is determined by the process of bidding for the property and ultimately decided upon by the highest bidder.
If it wasn’t for being introduced and trained on the Auction process, iThink Property Principal Ben Walker would have ended his real estate career very abruptly.
“I nearly walked away from real estate, until I was introduced to auctions. I just got the auction process, it’s not rocket science, but once you understand how it works, it is by far, in my opinion, the best method of sale. Basically, it involves a shorter marketing campaign, all possible buyers are flushed out of the market-place, and we then bring them all together in a competitive bidding environment. Ultimately the goal though is to achieve a premium sale price for our vendors,” Ben said.
BENEFITS OF AUCTIONING A PROPERTY
- There is a finish line in place for the sale of the property
- Potentially achieve a higher price for the property
- They create competition
- They create urgency
- There are set terms Shorter marketing campaign
- A quicker and less complicated sales process
- Knowledge what the market is willing to pay for your property, especially if it is a unique property and there is little to compare it with
- Buyers are genuine and can’t pull out down the track if they change their mind
- There are three opportunities to sell your property: The first is prior to the auction, provided you are presented with a favourable offer. Secondly, under the hammer and finally, you have the opportunity to sell your property post-auction.
THE CONS OF AUCTIONING A PROPERTY
- Vendor and buyer fear of Auctions
- Not achieving price, you are after
- Buyers need to have unconditional finance in place which can narrow down the buying pool
- No cooling-off period Building and pest required before the auction
TYPES OF AUCTIONS
The traditional form of auctions is on-site at the property you are actually selling. A crowd congregates at the property on auction day, and generally, an open home is held prior to the auction event starting to allow potential bidders a last chance to look at the property. Not every property that is being sold for auction is a good candidate for an on-site event. Many factors can contribute to the success of an onsite event, with many having the ability to hinder your successful sale. Environmental factors such as bad weather, traffic/air noise, and neighbourhood location can also contribute to the success of your on-site auction. There are also other problems such as the property being tenanted, disrupting neighbours, privacy concerns and the property’s capacity to host a large also have the potential to ruin your event.
At iThink Property, we like to do Real Estate different and our Auction events are really like no other. We are huge fans of the in-room auction process, or “Auctions Under the Stars” as we call them. We host community inclusive Auction events at popular local venues that help create a real buzz in the local community and more importantly for the properties we are looking to auction.
By hosting your auction off-site, in a controlled environment, you can easily eliminate all the disruptive factors. In-room auction events also give you and your sales consultant a chance to showcase the property and marketing campaign through the use of audio and visuals. This will help highlight the key selling factors of the property and it will help reintroduce your home to those keen bidders.
One last benefit of hosting an in-room auction event is the attendees. In-room events usually tend to attract serious buyers and are usually hosted as a result of several properties going under the hammer. This means the room will be filled with prospective buyers looking to purchase. Although these buyers might be there to witness the auction of a certain property, they may just end up falling in love with your property. Having serious buyers attend also helps with the post-auction negotiations.
LIVE STREAM AUCTION EVENT
Our world has certainly changed since Covid-19 came along. Rather than letting it affect our business we have pivoted in the face of the challenge and have turned our In-Room Auctions into Live Stream Auctions through Facebook. Whilst not a new thing, live stream auctions that is, it has been a first for our business and we are thriving on the new format. We have successfully sold several properties and have not received any negative advice from buyers or potential sellers regarding the new process. How the process works for us is that we have all our bidders registered to bid prior to the auction, our agents have them on the phone prior to the property being presented and we go through the normal bidding process. Contracts are sent and signed electronically as well so we have been able to adhere to social distancing rules in all aspects. Once restrictions end we will more than likely resume our highly popular In-Room events under the stars, but it has really demonstrated that it is a viable auction method.
THE 4 WEEK AUCTION PROCESS
Prior to Week One
Your agent will check in with you and organise the professional property photos to be taken and the Auction stock board to be installed. They will also run you through the auction process, talk past auction stats, and devise a plan of attack for your property.
Your property will be launched and advertised on various online real estate portals. This includes: Premiere Listing on Realestate.com.au Premium Plus listing on Domain.com.au Listing on other sites such as on the house and homely. Your agent will also launch your 4-week social media and Facebook campaign, in an attempt to reach a wider audience (such as out of town buyers, investors, passive buyers, and active buyers).
Week One – Three
Your agent will schedule weekly open for inspection times to show off your property and liaise with potential bidders/buyers. They will also provide you with weekly reports and feedback on the price and the market. This will help give you an idea of how buyers perceive your property price wise and it can also help you determine a reserve price. The agent will also continue to use tools such as direct marketing and social media boosting to create more hype around the auction and gain some wider exposure.
Week Four – AUCTION WEEK
During this week you will meet with your agent to set the reserve. Setting a reserve is extremely important and requires an educated and realistic decision. You will want to consider the market feedback before determining what price you would like to achieve. Is your price realistic? or will it leave you setting a list price post-auction? During this final week, your agent will also host any extra last-minute inspections and prepare you and our property for the in-room auction. Auction Night On the night your property will go under the hammer alongside a couple of other properties. Your agent will communicate with you throughout the auction and hopefully, the bids surpass the reserve and you sell under the hammer.
If your property is passed in
Don’t despair if the bids do not surpass the reserve there are still a few options. Most vendors go straight into negotiation with those who have attended the auction and made a bid. Sometimes some conditions stop these bidders from going any further in the auction, so in this case, you may still achieve a contract on auction night (conditional). If you decide not to take the highest offer or to go into further negotiations with the interested parties you can place a list price on your property. In this case, the auction feedback may help you determine a price that the market sees the value in.