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Many suburban regions across Australia have a long-established love affair with auctions, and rightly so. But they are not a magic wand and to achieve the best prices vendors should avoid these common pitfalls.
1. Receiving multiple offers before auction
CEO of LocalAgentFinder, Matt McCann, says that in the current conditions it can be common for vendors to receive offers prior to auction.
But accepting an offer means you are denying any chance for competing buyers to force up the sale price of your home.
“At the same time, auction day could mean the property is sold for less than what you are offered in the lead up,” he said.
“Offers made prior to auction must be exceptional in price and favourable in all conditions, as buyers are not just purchasing your property – they’re purchasing the right not to compete with the market.”
Mr McCann says getting several buyers request contracts or property visits could point to strong competition on auction day.
2. No bids on auction day
A good agent, says Mr McCann, will be keeping tabs on buyer interest and carefully gauge buyer sentiment to determine if it’s shaping up to be a ‘hot’ auction.
“Essentially, auctions thrive when there is competition for your property and fail when an agent has misread how your property sits within the market.”
He said a well-run marketing campaign should convince prospective buyers to spend more on a property at auction through competition and FOMO (fear of missing out).
“Your agent should be in regular communication with you, and will advise that you should not proceed with an auction sales method if buyer interest is lower than expected.”
3. The buyer walks away from the deal
Mr McCann warns that if your property sells at auction, it doesn’t necessarily mean everything is done and dusted.
“Occasionally, buyers do walk away from their contract and the main reason for this is due to finance,” he added.
“In some cases, you could be left with having to pay your agent his or her full commission.”
Mr McCann said that when choosing an agent to sell your property, you want to know that they will cross their t’s and dot their i’s — and that means vetting buyers as much as possible.
“Agents screen potential tyre-kickers early in the process to ensure that only capable bidders put their hand up on auction day,” he said.
4. A poorly-timed auction date
If your auction clashes with a major sporting event or holiday, says Mr McCann, it can seriously reduce the number of prospective buyers at auction.
“Great agents will give you advice on auction timings based on the type of property you’re looking to sell,” he says.
“For example, if your property is a family home, an auction over the Christmas or Easter period would be ill-advised given many families may have booked a trip away.”
5. Your property doesn’t reach its reserve and you choose not to sell
Mr McCann says auction campaigns tend to demand a serious investment in advertising and agency fees.
“That’s why if your home doesn’t reach its reserve price on auction day, you may choose not to sell and try a private treaty sale method.”
But the decision to re-list your property shouldn’t be taken lightly — and the best agents will advise you of this early on.
“Re-listing your home after a failed auction campaign provides a huge amount of information to prospective buyers, including how much your property was passed in for.
“They know that you’re not going to accept anything under the highest bid and it shows that you’re potentially not open to negotiation. When your home hits the market again, it could appear stale in buyers’ eyes or make them think there might be something wrong with it.
“Great agents will come to you with a fresh marketing strategy to prevent these opinions amongst buyers,” said Mr McCann.
6. Lowering your reserve to ‘meet the market’
You should not have to lower your reserve, says Mr McCann, if your agent has priced your property realistically.
“One of the first things an agent will do is provide an appropriate price guide estimate that accurately reflects market conditions to help guide your reserve.
“It is a good idea to compare local agents in your area to get a sense of what this estimate may be, and don’t necessarily go with the agent who gives you the highest price guide, because it could leave you disappointed on auction day if they have over-quoted to win your listing.”
An auction is a public event for the sale of assets and property to the highest bidder among a group of buyers.