Does An Auction Always Equal A Better Sale Price?

When weekend auction clearance rates start to decline, you have to start asking yourself why are so many agents still recommending them?

When a property fails to sell at Auction or at the very least within a couple of days after, it can really hurt the sale of a property.
The market has already spoken and they’ve told you, in no uncertain terms, ‘we’re not willing to pay you what you want’.

To understand why ‘auctions’ are a lot of agents ‘go-to’ selling strategy, you have to first of all understand why they favour them.

  • Agents feel confident they’ll get a quick sale and vendors feel happy they got the best price they could (given it sells for above their reserve price).
  • They can allow the market to tell the vendor what their property is worth, without having to put their reputation on the line.
  • They give themselves 3 chances of selling the home - pre-auction, auction, post-auction
  • They can usually demand a pretty hefty advertising budget, more exposure for the property gives them more exposure too.
  • If a property doesn’t sell, they can easily blame market conditions instead of their performance or selling strategy.
  • It’s easier to get a price correction (fancy term for having a buyer drop their asking price), when a seller has witnessed first hand the lack of interest in their property.
Don’t get me wrong, when properties are selling like hotcakes auctions are an easy and justifiable way to achieve a great price for a property. However, I’m not really sure why so many metro agents are so set on using them when buyers stop responding to them.
You have to ask yourself, when a market starts to normalise, as it is now, and buyers become pickier and less motivated, are auctions really the best way to get a home sold for top dollar or do they just end up hurting a sale?
Everyone knows Auction campaigns are expensive and when they deliver the desired results, a vendor doesn’t mind that they’ve shelled out thousands (sometimes 10’s of thousands of dollars). However, when a property is passed in at auction, the disappointment in a room is palpable.
All your high hopes of selling and achieving an amazing price have been quashed.
You’re now left wondering, ‘where to from here?’.
See, auctions can be a risky selling strategy for a number of reasons and there are certain properties that should never be put to auction.
If you fall into any of the categories below, you should strongly consider a private treaty sale instead.
  • The market isn’t embracing them. Ie. low auction clearance rate
  • If you’re selling a ‘cookie-cutter’ style property
  • If you live an area with little owner occupiers.
  • Your property is in a slow market

What to do if you’re thinking of selling soon

If you’re thinking of selling in the not too distant future and agents are pushing you towards an Auction, you need to ask them a few questions before agreeing. 
Ask them...
  • What the auction clearance rate is in your area and for your type of property? You need to be comfortable with the number of homes that AREN’T selling at Auction as yours could end up being one of them
  • Why they think an auction will work better than a private treaty sale? They need to be able to justify why they think an Auction will attract not only a greater number of serious buyers, but also a higher selling price. 
  • What their approach is if a property fails to sell at auction? If their first idea is to drop your asking price, this tells you that their pinning all their hopes on the auction doing the work for them. An agent needs to be a great negotiator, regardless of the way they choose to sell a home. Unfortunately, over the past few years, too many agents have allowed auctions to do all the work for them and have failed to develop that crucial skill. 
  • Would they prefer to accept an offer before Auction and why? If they answer yes to this question without a valid reason why, they could very well think that an Auction may not deliver you the desired outcome and rejecting a good offer could prove risky. 
At the end of the day, if you’re confident with the answers an agent has given you, by all means entertain the idea of an auction, however, if they can’t really justify their position and selling strategy to help you achieve the best price possible, you should keep searching for another agent with a better selling strategy.
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