Barfoot & Thompson Auction Manager Campbell Dunoon says nearly one third of homes auctioned by the company are sold under the hammer or by the end of the next business day (“literally within 24 hours,” he says). Even in a quiet market that jumps up to nearly 50 per cent by the end of the same month. These figures don’t take into account the properties with offers on them that vendors decided not to accept, Dunoon points out.
Vendors selling by auction have the very best opportunity of achieving a premium price, a signed Sale and Purchase agreement and a date of their choice to move.
Dunoon gives six good reasons why people should consider auctions for their sales campaign:
1. Demonstrates vendors are serious
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“There is a strong argument to say that auctions show a willingness by the owner to sell,” says Dunoon. Not all vendors offering property through negotiation have the same inclination to sell, as they may be testing the market. An auction puts vendors in control, he adds. They set the reserve and possession date that suit their needs.
2. Has a fast turn-around
With auctions there is a finite selling period, and the marketing campaign is concentrated whereas negotiation is open-ended and could take weeks or months longer.
3. Gives a better sense of market price
“Valuation is an art and there is no guarantee that valuers always get the market price right”, says Dunoon. Vendors can miss out in a negotiation if the price is too high or too low. Auctions are an immediate show of market forces, the price buyers are willing to pay on the day.
“You set a reserve and the price the property reaches on the day or in subsequent negotiations gauges what the market is actually willing to pay.”
4. Flushes out cash buyers
Cash is king in real estate. With an auction buyers are cash unconditional and once the deal is done they can’t back out: the house is sold when the hammer falls. It’s no wonder vendors love cash buyers. With negotiation there can be complicated conditions attached to a sale. “Conditions create risk for the vendor,” says Dunoon. “If auctions don’t lead to sales, they will have at the very least flushed out the conditional buyers who can then be negotiated with.”
5. Creates a sense of urgency
“In the current market, buyers are cautious and are hesitating to engage in negotiations behind closed doors,” says Dunoon. “With an auction there is a sense of urgency, which makes buyers show their hand.
With an auction buyers have to get themselves ready and they can’t afford to sit back. Auction day really does get the procrastinators to take action.”
6. Buyers may pay more
Where auctions attract multiple bidders they create the conditions for customer competition. That in turn can lead to a premium price and sometimes vendors are pleasantly surprised with the outcome. Dunoon says that, mentally buyers have bought the house before they walk through the auction room doors and will stretch further financially than they anticipated. He himself spent more at auction than he planned to when he bought his last house.
“There were four other bidders trying to take MY house away from me,” he says. “It shows that no buyer ever really knows what they will pay until they are faced with losing the home and competition can drive them higher. If, however a vendor sets a price for negotiation you are bound to get offers beneath that level.”
Barfoot & Thompson differentiates itself from other real estate agencies when it comes to auctions because it doesn’t use vendor bidding, says Dunoon. “Vendor bidding can backfire. If a single bidder finds him or herself pitted against the auctioneer their very first reaction is to be conservative and they may not bid. They know with Barfoots there is no ‘gamesmanship’ from us or the vendor.”
Dunoon finds that bidders prefer the Barfoot & Thompson’s approach, as they know they can bid in confidence. If the auction stalls, the auctioneer will negotiate with the bidders.
“Bidders just want us to cut to the chase and we negotiate on the floor,” he says.
A Barfoot & Thompson agent works with inexperienced and nervous buyers to educate them about the auction process. Once comfortable with the process they are happy to bid.
“In order to achieve the best from a buyer it is our role as salespeople to make buyers feel at ease with the process,”
Dunoon says. “The more comfortable someone is the more they are going to spend and that’s what vendors want.”
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