It's the scenario that home-owners selling by auction need to prepare for, but often rarely do: their house fails to sell under the hammer.
Go to enough auctions and you'll see that it's not uncommon to see homes pass in - the term the real estate industry uses when the bids in the room are below the vendor's reserve price.
For vendors, the idea that no one in the auction room wants to buy their biggest asset can be a nerve-wracking one; suddenly, it's the buyers who are in control. However, vendors who have a game plan can come through with a sale or at least a better understanding of where their home sits in the market.
TV viewers who watched the finale of The Block NZ yesterday will have seen what effect a property passing in can have on a vendor's state of mind, with two of the teams watching in disappointment as their efforts failed to get bidders to the reserve.
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Sumich Estate Agents and Auctioneers owner Mark Sumich says that often what's offered at auction is the best price. “The market is the market. You can’t force people to do something. You can’t force the buyer to pay more if they don’t want to and you can’t force the owner to accept it," he says.
However, it is not the end of the world if your property passes in; in fact, unlike, with other methods of sale, you'll have clarity as to what buyers think your property is worth, and whether or not you can meet their expectations.
In NZ auctions, the top bidder has first right of negotiation, and if that fails to yield results, vendors can approach the bidders in the room. Often this can result in a deal being struck soon after.
Barfoot & Thompson managing director Peter Thompson says that many passed in properties end up being sold "hours after the auction has taken place".
"Frequently contracts are being negotiated immediately after the auction has finished, and those that aren't are most commonly listed with a price. This price is often very realistic. With a good sensible price, a sale [can be] concluded relatively quickly," he says.
In fact, this is what happened on The Block, with the New Zealand Herald reporting that one of the apartments sold soon after passing in.
Sumich says that reasonably set asking price will attract buyers. “It’s certainly not nuclear physics. Sellers should take into account what happened at the auction, their own expectations and what they think is likely to attract interest,” he says.
Real Estate Institute of New Zealand chief executive Bindi Norwell says patience is key. “We would also recommend a debrief with your agent to understand all the feedback gained from the open homes – is there something simple that can be fixed like painting a wall or re-wallpapering or sometimes it might be that the price is too high.”
She adds that auctions can achieve good results. "Block winners Lisa and Christopher sold their apartment for $1.34 million – the second highest price for an apartment in Kingsland. However, second placed Stacy and Adam sold Apartment 1 for $1.48 million - a record for the suburb of Kingsland," Norwell says.
Thompson says the main challenge facing the Auckland property market going into spring is not auction clearance rates but the number of properties coming to market. "In recent months we have been seeing close to half of the properties offered being sold in the auction, which is a good improvement over what was being achieved six months ago. If anything we are facing a shortage of properties being offered, as open home attendance has lifted significantly," he says.
