Going once, twice, three times
Auction expert Damien Cooley gives the lowdown on why property auctions are the best way to sell right now.
As an auctioneer the question I get asked regularly is, "is my home an auction property?" and here lies one of the biggest misconceptions about what type of properties are suited to be marketed as auction, because every property is an auction property!
So, what is an auction? You may consider an auction (for property) to be a place where buyers can publicly place their bids and secure a home or investment with certainty, subject to the seller's willingness to accept their offer.
You may also consider an auction to simply be a marketing strategy to achieve the best possible price for the seller in the most timely manner. The fact is, both are correct.
A powerful benefit of an auction is that it creates urgency around the sale – urgency for the seller to make a decision by auction day and urgency for the buyer to make a decision by auction day. In real estate lingo, we refer to this as "reducing days on market". We know that the longer a property stays on the market, the more people question what's wrong with it.
Well, there are three reasons why properties don't sell: price, presentation and marketing. More often than not, price is the real issue.
A positive by-product of an auction campaign is competition. If loads of buyers want to buy the same property it usually means it will sell for more than the owner is willing to take! That's when we hear about properties selling above their reserve price.
Throughout the recent boom in Sydney, we were averaging 6 or 7 bidders at auctions. When the market is weaker, essentially all that means is that buyers are less willing to pay what the owner wants, and we refer to this as a "buyer's market". In this market, we see 0-1, maybe 2, bidders per auction.
Another benefit of auction is you get three chances at selling. If you receive a good offer before auction, you can sell prior to the date.
Currently, about 28% of properties booked for auction in Sydney sell prior. If you have competition, running through to auction day can prove to be very rewarding, resulting in a strong sale. If the buyers are playing their cards close to their chest or lack motivation, you still have an opportunity to sell in the weeks following.
Auction gives the seller structure. Have you ever sold a home with kids? Preparing your home week in week out not knowing when you will be sold can be very draining. And this is what it feels like when you're not working towards an end date. It's like an open-ended buyer appointment!
Auctions provide a structured selling plan to an owner. They know exactly when the house will be open for inspection and when the auction date is. On this day, there is significant motivation from all parties involved to come to an agreement and transact the home. Ultimately it brings the sale to a head.
The final piece in this puzzle of auctions is price. Auction properties rarely cap the price. By this I mean it's not For Sale at $X.
Auctions are all about removing price as a barrier and allowing the market to tell the seller what they are prepared to pay. Ultimately, a property is worth what someone is prepared to pay. And properties are worth more to some buyers than others. They build an emotional connection with the property and they have to have it. You can change the aesthetics of a home but you can't change the aspect of a home, the street or the suburb. And this is why good quality properties will always sell well in any market.
Sure, a home that is structurally sound, has dated interiors and is in need of a face lift will do well at auction, as will that dump in your street! But this doesn't mean that a studio apartment on a busy road will not. There is a buyer for everything if it's priced correctly.
And for buyers? Well, there is no better way to buy. At auctions you can see who you're competing against, and it's the most transparent way to buy property.
Damien Cooley is CEO of the largest independent auctioneering company in Australia and the most booked auctioneer in the country. He is the 5x winner on Channel 9's hot reality TV show, The Block.
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