Residz Team 4 min read
Just got a text from a friend who didn’t get sell at her recent auction: “Buyers are a pain in the a%$#.” It’s been a “pretty stressful time,” she says, having readied their house for auction but getting no champagne pop on the fall of the hammer. Then, I watched Stuff’s interview with a seasoned New Zealand property investor who said “auctions have had their day.” It made me wonder if auctions have “had their day” in Australia too?
Given CoreLogic this week reports 635 property sellers across Australia watched their auctions end with no sale on the hammer, our friend over the Tasman may have a point. Auctions may be heading to a point where they have “had their day.” CoreLogic data shows auction clearance rates are falling and now sit below 70% in all capital cities except Canberra and Adelaide.
Yet, many home sellers like taking their chances at auction. Auction volumes across the country are jumping around between 2000 and 3000 a week. Sydney and Melbourne account for the bulk. We saw listings of property for sale up 500% in Sydney’s Eastern Suburbs in January, and more auctions are being held this year in the two cities than during the frenzied property market at the same time one year ago (CoreLogic).
With talk of price falls ahead, sellers with FOMO are no doubt keen to have their house or unit sold while the property market still has a pretty strong heartbeat, and before buyers feel property is out of their reach, get skittish over international events, crippling inflation, or interest rate rises.
So what is a property seller to do? The investor interviewed by Stuff said “Selling by auction is a good thing to do if you’re in a price range where you’re going to get a lot of interest, and there’s a lot of people in a position to be able to buy.” That makes sense to me. However, another expert suggested going to auction only if you had a quality home in a quality location. Who’s right?
I dug around and found an article by Pennisi Real Estate which says research shows that more than 90% of buyers do not like auctions. It says auctions are a “huge mistake” as they only tell sellers what the highest bid is, not what the highest price could be.
“Buyers only have to outbid the buyer below them, meaning most buyers at auction buy for less than their limit.”
The article goes on to say an auctioneer yelling out “It’s on the market” tells buyers what your lowest price is. Yet, you are not privy to their highest limit. By contrast, a private treaty sale starts from a position of strength, it says, and it keeps competitive bids private.
“If you have the fortunate situation of having more than one buyer trying to buy your home, the worst thing you could do is disclose the competing offers to each of the interested buyers,” it says.
However, many sellers want to experience a bit of the gold dust so liberally sprinkled over sellers going to auction in 2021 (not the buyers, though, many of whom will have buyer’s remorse and the property blues in 2022). Remember those crazy times and wild facts as record results at auction hit the headlines week after week? Today’s home sellers are the ones who were madly decluttering, painting and renovating while watching the frenzy from afar, hoping to catch the peak of the market.
Auctions have their good and bad points. Theoretically, it creates a sense of urgency and puts a time stamp on the sale of the property. However, I know some very clever buyers who don’t fall into the urgency trap. They stick to their price and calmly and unemotionally move from property to property until they get the result they set out to achieve.
The time stamp doesn’t always work either. If you hired stylish furniture, a no-result auction means you now have to decide whether to continue renting the furniture, decide to buy it, or revert to your own grubby sofa and chipped dining chairs. You have to pay to keep advertising the property (unless you list it for free on Residz.com). And your unit or house now needs to be in tip-top sale condition for an unknown period of time, difficult if it’s tenanted, you have pets or kids, or you are busy working.
What auctions signal to buyers is that the seller does want your house sold in the 4-6 week timeframe. It’s really on the market, unlike one unit many years ago where the owner promptly withdrew his apartment from sale when offered the asking price (I know, because I made the offer). He was “testing the market” I was told. He certainly tested my good feelings towards him. Pity Residz.com hadn’t been around, he could have set his dream price and tested the market that way!
Deciding to go to auction is ultimately a decision to be discussed with your real estate agent and property experts. As long as there is a property market, there will always be auctions. Look how resilient they were, even during the pandemic lockdowns. If I ever sell a house in future I will think very carefully about it though, given many of the salient points being made by various experts. I’ll also be watching the auction clearance rates very carefully over the next months. Watch this space!
Image: Auctioneer gavel, Quince Media, Wikipedia