Deciding to sell your home can be a stressful experience, let alone choosing whether or not to go to auction. If you’re wondering whether an auction is really the best method of sale, buyer’s agent Henny Stier from OH property is here to explain the pros and cons.
Auctions are a common method of sale in the Sydney Metro area. It’s most common for house sales, but many units in sought-after suburbs are also sold via auction. In recent years, the media has reported many stories about properties which have smashed reserves at auction. This leads many to think that auction is automatically the best way to secure the highest price for a vendor, but there are many circumstances where sale by auction may not yield the best result. As a buyer’s agent, in some situations we advise our clients to wait for auction because a better result may be achieved there than by private treaty negotiation beforehand- but the flip-side of this is that vendors might actually do better by not selling at auction.
Here are some reasons to avoid auction….
1. High end properties
These homes may be exceptional and unique but it may take a while to find the right buyer (at the right price). Trying to force a sale into a four week auction campaign may not be long enough to identify the buyer willing to pay the highest price or premium price for that property. It may take several months to find such interest but waiting could result in a final price which may be hundreds of thousands if not millions more. For these properties, the chances of getting multiple highly interested parties at the same time (the ideal scenario for an auction) can be low. Additionally, many vendors of high-end properties prefer discretion and worry that a failed auction (where a property fails to reach the reserve price and passes in) could cause a stigma around the property and they might ‘lose face’ amongst their peers.
2. Properties with obvious serious flaws
These properties may be on a very busy road, near power lines or substation, etc. It may take a long time to find even one buyer. Taking these properties to an auction that’s likely to fail will just tarnish the property going forward from there.
3. Holiday period sales or weak market conditions (a buyer’s market)
The vendor may have a reason for an urgent sale despite it not being the ideal period during which to sell (such as between Christmas and New Year). This is a time where buyer demand is low and it may be hard to achieve momentum and get multiple parties to register at the auction.
4. Failed campaigns
When the auction campaign fails to generate at least 2-3 very interested parties, the vendor may be best served by negotiating privately with the parties prior to the auction and cancelling the auction. This way the prospective purchasers remain uncertain about the actual and exact level of competition.
5. Agents who don’t like auctions
A vendor is better off in a private treaty sale if the agent they have appointed is uncomfortable with the auction process. We come across many agents who constantly advertise every listing as auction yet hardly ever see through the process because they are simply not very comfortable with it. An agent who is neither confident nor committed to the auction process will do more harm than good.
6. Elderly buyers or young buyers
When the target buyers are the elderly, auctions may not be the most appropriate method of sale. Elderly buyers tend to be more conservative and the stress of an auction can often put them off a property. Similarly, many young clients initially come to us and tell us they refuse to even inspect properties which are for auction. They don’t trust that the process is fair or simply don’t like the competitive nature of auction and feel that they are likely to overpay. Therefore, it may actually be more beneficial for the vendors to conduct private treaty negotiations.