Real Estate agents love auctions, in particular Australian Real Estate Agents…I am convinced it has something to do with our national spirit, the propensity to have a punt.
Strategically if the process has been handled properly then the price guidance to buyers will be conservative (low) and the outcome will be bid up and create the impression that the selling agent has created an excellent outcome. In many cases this is true and there are some skilled agents that know how to create strong competition… oh, and this market has been helping too!
There are some instances when auctions can be ideal, for example when a market is rising so quickly that buyers will only go to a higher level knowing their interest is supported. In these instances the market is visible creating confidence amongst the competing bidders. Expressions of interest or blind bidding can inhibit sales results if the buyers are suspicious. Another example is if the property forms part of an estate and probity is an essential consideration. An auction in a litigious settlement is a preferred approach as the agent and the vendor has very little influence on who actually buys the property. In this instance the price may not matter as much as the process.
There are instances when public auctions can fail the seller and actually damage the sale price, in my view most highly unique homes fall into this category. By unique I mean properties that are unusual (as opposed to rare), an example would be a 2 bedroom apartment opened up to form a huge 1 bedroom, or an ultra-modern home in a historic suburb. I can hear the agents saying ‘this is the perfect time to auction!’ But is it?
Unique homes attract unique buyers. I sold one of two cutting edge Architect designed town home sin Mosman a few years ago, yes we had dozens of people through however at the end of the process there were only two willing and capable buyers. One had a limit of $1.6Million, the other who we sold it to paid $1.925M. The property’s identical twin had been sold just 8 weeks earlier at auction for $1.6Million….worse still the buyers openly said they would have paid more but didn’t have to!
The key is understanding how much interest there will be in your property and if it will be at the same level before deciding on a strategy. Too often agents come in and say ‘lets go to auction’ without considering all options and buyer support. One size doesn’t fit all.