Real estate auctions need to adapt to different markets. A good auctioneer conducts the room like an orchestra. Those rooms can have very different vibes and rules depending on where the market sits in the property cycle.
Auctioneer trainer John Abbott, of John Abbott Sales Training, says the strategy of the auctioneer is very different in a hot market with multiple bidders from one where there is a single bidder who needs to be coaxed.
Nonetheless an auction can work in any market, says Abbott: “In a boom market, you try to get a premium result and in a buyers’ market you want to encourage the bidders to make a decision and stop them procrastinating.”
The auctioneer is a market-maker and the state of the market determines how they go about getting the best price for a property.
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“It is to do with how may bidders we think we will draw to each auction.”
For example, if there are four registered bidders, it doesn’t matter if the auction starts out quite low, Abbott says.
“It will get up to market value and everyone is happy,” he says. “In the current market, you might only have one bidder. A competent auctioneer will still make the sale. But I would be hesitant to take a low opening bid.”
In a boom market Abbott would be happy to take a $500,000 opening bid on a $1m property. “If there is only one bidder I would suggest starting at $800,000 to $900,000,” he says.
Where there is only one bidder, Abbott would consider pausing mid-auction: “Rather than using a vendor bid against them, what I will often do is pause the auction and get them to increase their bid to the maximum they are willing to pay and then present that to the vendor.
“From a buyer’s point of view, if you can make a cash offer at auction it’s best to do that. If I was a buyer and could pay cash, I would make sure I bid (so that) I am not in the position of competing with a conditional offer the owner has. This is something I discuss with the bidders. I say, ‘give me your best shot’.”
Harcourts CEO Chris Kennedy says in his opinion a good auctioneer shouldn’t need to make any changes to the way he prepares for or conducts an auction when the market changes.
“The only difference really is that this preparation work is even more important. A good auctioneer, from a real estate company with a good auction track record, will be involved with the sale almost from the point of listing, alongside your sales consultant.
“When the market is quieter than we’ve come to expect, the setting of a good, realistic reserve price is particularly important and, though that figure is not actually set the day before the auction, you are working towards that figure and beyond it from the beginning,” says Kennedy.
“Your auctioneer should know everything about what the seller’s expectations are and be working towards getting them above that reserve. If that’s not possible, (they should be) getting them the best position to begin negotiations with the highest bidder.
“He or she should also be fully across how much interest has been shown in the property through the marketing campaign, what comments have been made at open homes, and how many bidders are likely to be at the auction. But again those are all the markers of a great auctioneer, whatever the market.”
