Selling By Auction

Question and Answer

Question: I have heard of selling homes by auction but I do not fully understand how it all works

Answer: When it comes to real estate we have noticed, over the years, that the auction method has seen a steady increase in the number of homes sold under the hammer aligned with more active buyer engagement from owner-occupant consumers. This is not just a recent thing as even in ancient times property and other valuable items have been sold by auction in a desire to obtain the best price in the shortest time.

Ultimately, auctions can be a smart and efficient way of selling your home in a variety of markets, and it’s no surprise that both buyers and sellers are turning to this targeted method to reach an agreement on market price.

Here are some, but by no means all, reasons why selling via auction could be the right choice for you

1. There is no ceiling in a competitive market

(Quote) There’s nothing quite like the buyer’s rush inspired by a bidding war, and in a strong seller’s market, the sky’s the limit. Auctions create competition. If you’re capturing the market at its height, an auction plays to people’s emotions. We find that people will often spend a lot more in an auction environment than they would in a negotiated sale as the fear of missing out takes hold. Buyers sometimes turn to the auction method if they’ve experienced resistance trying to purchase through traditional real estate negotiated listings. Competitive markets increase the buyer bidding pool and increase buyers’ chances of paying more than they wanted. The buyer however has the comfort of knowing that they are not paying too much as their bid was just one bid more than another party was willing to pay for the property.

2. Save time and money in a slow market

Auctions are not only for competitive markets. They can also be helpful in a downturn to sell a house quickly at true market value. In a slow market, it can be difficult to keep up with the trajectory of pricing. If the market is losing say 5% value every month, and your expectations are only decreasing by 2% a month, you’re never going to catch up. That’s how you end up with houses that linger on the market for five or 10 years — they just never caught up with pricing.” By auctioning a home, you can avoid that lag and ensure that when your home sells it reflects true value.

3. An auction attracts serious buyers

Auctions see their fair share of investors with plenty of capital, but lately, auctions capture bids from the everyday house hunter as a lot of them are just as serious about a purchase as the area's investors. Investors are usually trying to do one of two things, either get into a competitive market — which makes them a very serious buyer — or they’re trying to get a home that needs a bit of love or renovation. To further ensure the auction draws only serious buyers, companies like ours require users to undergo a prequalification process before they can bid. The highest bidder is required to provide 10% of the purchase price at the time of sale. This deposit helps ensure the sale will go to settlement and weeds out less-serious buyers.

4. You have the advantage of knowing the likely date that your home will sell

Holding on to a property can be costly. Selling your home via auction not only expedites the process, but the auction method also allows you to, know the likely date of sale, so you are able to budget accordingly. Sellers can avoid high carrying costs like mortgage payments, taxes, and home maintenance by budgeting for a likely sell-by date rather than listing a home the traditional way and just hoping for the best.

5. Do not find yourself pricing your home wrong at the top of your voice.

At an auction there is no price, sure, buyers will discover the rateable value, and can get their own valuation, but do you really know what your property may be worth? After a period of no price marketing which attracts other open home buyers and out of town buyers to view and comment you may well find that your expectations, and those of your advisors, are wrong. By the auction date you should have a fair idea of where you should pitch your reserve. Sellers who ask too high a price for a home on an advertised price will inevitably get a lot less as buyers will quickly get wary of paying too much for any property that has become stale on the market.

6. Marketing

As the period of pre Auction is pre defined then all of the marketing money can be concentrated inside that period to get the best coverage. The costs associated are designed to provide reach to the widest audience of buyers.

7. Flexibility

You retain the right to withdraw the property right up to the fall of the hammer, you are the sole judge of where your reserve price will sit on the day. You have the confidence that nobody will know your reserve price and try to beat you down.

8. Transparency

Everyone can see and react to the situation being played out in front of them. It is indeed totally fair and transparent. No closed documents that can leave you or your buyer hanging there for days while things are negotiated out of sight behind closed doors. It may well be that right at the auction there is some talk that is private but everyone gets the same chance to buy.