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Selling at Auction

Selling at Auction

The very best means of achieving a premium or fair market value for a property within a specified time is auction.  The deadline for the sale creates a sense of urgency among buyers and sales consultants alike. 

 

The word 'auction' derives from the Latin word 'augere' which means 'to increase'. Dating back to Roman times, auction is one of the oldest methods of selling and yet today is the most advanced method of marketing real estate. 

 

Auction involves a short, sharp and intensive marketing campaign of a property without a price.  This is to test the market to see what buyers, in a competitive situation, are prepared to pay to become the new owners of that property.

 

Marketing with a price limits what a keen buyer may pay.  Once a listing price has been established for a property, a ceiling has been placed on what a buyer expects to pay for it. Auction, on the other hand, offers a real opportunity to get more for a property than the seller might expect.

 

Our objective is for the seller to have the highest price possible offered for their property by the end of the auction campaign.

 

A well-run auction programme will ensure that the property gets the maximum exposure. It is certainly the method that offers the highest degree of responsibility and control shared between the consultant and seller.

 

Through auction, buyers are prompted to pay their top price by:

 

  • the deadline
  • confirmation of value and desirability by other buyers/bidders
  • fear of loss to a stronger or keener buyer/bidder.

The Auction Process

Stage One

The pre-auction period

Three to four weeks are spent sourcing buyers to qualify and prepare to bid at the auction. High profile auction marketing will highlight the property, producing the greatest exposure during the period when enquiries are likely to be at the highest level.

During this stage the consultant gathers market feedback to help the seller set an educated reserve price. The seller can agree at the outset to accept offers prior to the auction and may choose to sell during this stage.

 

Stage Two

The day of the auction

The auctioneer and consultant will establish the opening bid level-crucial to create active bidding. The auctioneer also declares publicly that he/she reserves the right to bid on behalf of the seller which is simply negotiating on the seller’s behalf. The auctioneer will not sell the property below the reserve price set by the seller but will use his specialised skills to build bidding momentum and emotional competition between buyers to encourage fear of loss, desire to win and ultimately the best price possible for the seller when sold under the hammer.

 

Stage Three       

Post-auction period

Should the bidding not meet the seller’s reserve the auctioneer will pass the property in at a level agreed upon that maintains its value plus its sale-ability.  Some people believe that if the property does not sell on the auction day then the auction system has failed. This is not true. Stage three provides opportunity to negotiate with those who may need to sell another property or arrange finance before they can commit themselves unconditionally.  The previous three to four weeks of market research provides the sellers with the confidence and ability to set a fair market value price on their property.

 

Benefits of Auction         

Auctions are an extremely effective way of marketing. This option gives the seller the greatest opportunity to obtain a premium or a fair market value. It creates buyer competition by putting buyer against buyer and provides an open and fair arena for competition on the auction day.

Auctions have many other benefits as listed below.

Benefits of Auctions for Sellers

The seller sets the terms, conditions and deadline.

  • This auction-oriented target marketing puts the `spotlight' on the property, adding a competitive edge that strongly favours the seller.
  • The property is neither overpriced nor undersold; its value is determined by the market and individual buyers.
  • The `no price' aspect will attract more genuinely interested, cash-in-the-hand buyers.
  • It allows sellers to plan ahead in the knowledge that a specific date has been set for the sale of their home.
  • A cash buyer means the seller can proceed immediately with their goals.
  • A sense of urgency is created by the set timeframe, bringing interested buyers to a point of decision.
  • The level of market interest will help the seller gauge the reserve price, with the real possibility of achieving a premium price.
  • The seller has the option and may decide to accept a cash offer prior to auction day.
  • Those who attend the auction will be focused on establishing the maximum price they will pay, not how little the offer should be.
  • The seller controls the terms of transaction and actively participates in the sale process.
  • A successful purchase requires a payment of a deposit on the day, usually 10% of the purchase price.

 

Download REAA Sale and Purchase Agreement Guide (English Version)

Download REAA Sale and Purchase Agreement Guide (Chinese Version)

 

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