Auctions vs. Price

One of our newsletter subscribers has asked us to outline some information for buyers and sellers about the auction process as they have noticed an increasing number of properties now using this method of sale.  We are always delighted to received feedback from our newsletter and happy to meet requests or take on suggestions wherever possible.

Auctions are becoming increasingly popular with Queensland sellers, after many years of a larger focus on traditional selling with a price.  The reason for this has revolved around clearer communication to sellers of what the benefits of this method can be, and the actual outcomes achieved.   As the saying goes, ‘the proof is in the pudding’, and we have been able to demonstrate to our sellers via real, recent examples of properties in their area sold via this method, that some exceptional results can be secured, often well above the reserve.

The two main advantages of an Auction for sellers are the deadline the campaign sets and the competition it creates.

An Auction campaign is generally 4-5 weeks, and the marketing during this time is intense; research proves that the highest level of interest in a property is within the first few weeks of listing, and rather than sitting on the market for months and months and becoming stale, and perhaps indicating to buyers that the property is either over-priced or has some other issue – Auction campaigns are deliberately short, but long enough to extract interested parties.  Timing is critical.

Many properties attract more than one interested party; this is where the Auction process truly shines.  By setting a deadline, a sense of urgency has been created for the buyer to either make an offer prior or to bid at Auction.

If there is more than one interested party, the bidding at Auction generally works to push the price upwards, and it is not uncommon for it to soar well above reserve.  Even if the property is sold prior, the price achieved in this case is often optimum, as the buyers doesn’t want to risk losing out to a more competitive bid on Auction day, so they present their best possible offer to try and avoid losing to the competition.  A good Agent should be able to guide the seller on whether it is worth taking a prior offer or not.

It’s not all skewed in the seller’s favour though; there are advantages of this process for buyers also.

If you have found a property you love, chances are there may be others interested in that property – an Auction process provides great transparency in the negotiation process for all buyers.  You can witness what the other parties are willing to pay and are given an opportunity to outbid or pull out.  With a private treaty situation, it can be daunting when an Agent is telling you other parties are interested and are trying to extract increased offers from you, and you just have to take their word for it on ‘good faith’…at an Auction, it’s all out in the open.

How does a buyer know if an Auction property is in their price range?

Even though in Queensland, an Agent can’t tell you what the price range is, if they know your budget, they can indicate to you whether or not it would be worth your while attending and bidding.

Check online to see what similar properties in that neighbourhood (or surrounds) have sold for recently, and that should give you a reasonable idea or ballpark figure.  You can also request a bank valuation but do keep in mind bank valuations are generally very conservative, and the property often sells for considerably more.