Despite the growing popularity of auctions as an effective method of selling property, most vendors will choose private treaty when it comes to selling their home. This method of a seller declaring an asking price (either fixed, a price range, no price, price guide or ‘end date’) invites offers to buy and negotiations begin from there. Often, the settled sale price is a figure around the seller’s expectations and, by definition, is representative of fair market value.
Conversely, a considered marketing campaign that includes an auction aims to move the buyers’ expectations on price from a level near the market price upwards and through competition to a price level at auction above the seller’s expectations. Whilst not all auctions end this way, current market conditions of low supply and high demand encourage sellers to seriously consider selling using the auction method. Achieving a cash, unconditional sale, a healthy deposit and on terms set by the seller is also hugely beneficial to those that sell by auction.
A properly implemented auction campaign provides the seller three opportunities to sell; prior to auction, under the hammer on the day or after auction and on this basis alone an auction offers clear advantages. A buyer fearful of being bid up on the day in competition will be keen to secure the property prior to auction on agreed terms. Buyers competing at auction will often push the selling price well above reserve and buyers not able to bid at auction can negotiate a sale post auction if it fails to sell under the hammer.
For unusual properties, those that are difficult to accurately assess value or highly desirable, rare properties are ideal candidates for an auction. The ‘no price’ marketing campaign in the lead up to auction day provides the sellers with coal-face insight into buyers’ opinions of value via the agent – invaluable in determining a reserve price. And once a property passes the reserve price, a skilled auctioneer ought to be able to achieve the highest possible selling outcome.
For buyers, an auction is the fairest and most transparent method of purchasing real estate. REIWA member Auctioneers must abide by an Auction Code of Conduct that outlaws dummy bidding and the auctioneer will always declare a seller’s bid. This gives buyers confidence in the auction process who can set their limits and compete in an open forum. Sale by Private Treaty gives buyers no such opportunity in circumstances where multiple offers are presented to a seller.
Most sellers who choose to sell by auction are keen to meet the market and given some buyers may be reluctant to bid, those that do have a great opportunity to acquire a property in a transparent environment.
by HAYDEN GROVES
REIA President 2021-2023
REIWA President 2015-2018
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These comments are the author’s own and may not reflect the opinions or policies of the Real Estate Institute of Western Australia/Australia.