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Why sell at auction?

Why sell at auction?

A few decades ago, auctions were something of a novelty. Today, almost three in every four sellers around Australia choose the auction method to achieve a great price for their home. With great weather and the love of entertainment on your side, why not consider it for yours as well?

They create competition

At auction, everyone can see what someone else is bidding, which can spark a competition. All you need are two motivated buyers and a skilled auctioneer, and you’ll see the bids go higher and higher. Particularly if your property is unique in some way, such as a tightly held location or original period features, buyers will be loath to lose their chance.

Your real estate agent will spend a lot of time qualifying buyers during the auction campaign. They’ll focus on buyers who display the most interest to ensure that they’re prepared to bid on the day. That means communicating with them, educating them on the sales contract and property information, and inviting them to open homes.

Certainty of sale

A property sold at auction is sold unconditionally. You can negotiate terms and conditions with potential buyers prior to an auction if you believe it will make the property more desirable, but as soon as the hammer comes down, the terms are set.

This is particularly useful if you need a certain settlement period. You might need a short settlement period in order to free up finances, or be relocating and want to stay in the property for longer. Selling by auction means you set the terms, and the buyer is bound.

It also means that you get a measure of certainty. There is an expectation that the winning bidder is financially secure and able to settle, so there’s no waiting around to see if the contract will fall through.

Keep your options open

Just because you choose to sell your home via auction doesn’t mean you can only sell on that day. A motivated buyer who’s seen your home may make an offer before the auction day, and if that price is within your range there’s nothing to stop you accepting.

Conversely, if the auction bidding falls well short of what you’d hoped, you are under no obligation to sell on the day. You can set a reserve price, which is the lowest price at which you’d consider selling, and if the bids don’t exceed that price the property is ‘passed in’.

If the bidding falls a little short, but the buyer is still keen, your agent will continue negotiations between the two of you after the auction is completed.

The auction process

Before auction day

Before the scheduled date, your agent will escort interested buyers around the property and go through the terms and conditions of the contract with them. They’ll also talk you through the contract and make sure that you’re satisfied with the terms and conditions yourself.

Your agent will advise you on a suitable reserve price based on their knowledge of the market and the preliminary feedback they’re getting from potential buyers. It’s up to you what reserve price you set, but do bear in mind the additional costs you might incur if you have to start marketing your property from scratch again.

On auction day

Your agent will schedule a last open home inspection before the auction. This is the last chance to convince buyers who are on the fence, so pull out all the stops. Make sure your home is sparkling clean and well styled to showcase it at its best.

All the documentation that relates to the property will be made available at least 30 minutes before the auction as required by law. In most states, interested buyers are required to register in order to receive a bidder’s number. The list is kept confidential. There are always on-lookers at an auction, who may live locally or be getting a feel for the market without yet being ready to buy.

Once the auction starts, the auctioneer’s skill comes into its own. A good auctioneer will put on a bit of a show, with humour and encouragement to put the crowd at ease and encourage them to bid. There are rules of professional conduct by which the auctioneer must abide to ensure that the process is orderly and legal, including the announcement of any terms, conditions or rules required by law.

They’ll read the body language of the crowd and identify the serious bidders, encouraging them to go higher if possible. At the end of the day, it’s the buyer who’ll choose how much they’re prepared to pay, and it’s your choice whether to sell at that price, but a skilled auctioneer will help the process along.

You will have set a reserve price in consultation with the agent ahead of time. Once the bidding goes over this amount, the property is officially on the market and a winning bid is binding.

If the bidding gets close to your reserve but then stops, the auctioneer will usually pause the proceedings and seek further instructions from you. They’ll ask you if you want to lower your reserve so that the property can be ‘on the market’ and sold to the highest bidder. Sometimes, the knowledge that the property is on the market will galvanise bidders and mean that the bidding carries on in earnest after the reserve is reached.

If the bidding doesn’t reach its reserve and you are unwilling to lower it, it is passed in. In this case, negotiations may continue in private with the highest bidder.

Tips for a successful auction

Use the open home inspections to your advantage to win over undecided buyers before the auction. Make sure your home is spotlessly clean, all clutter has been removed and the rooms are well presented. Put fresh flowers or fruit in the rooms, get the windows and carpets professionally cleaned, and tuck away personal items or family photos.

The more interested buyers you can attract to your auction, the greater your chances of getting a bidding competition going on the day. That might mean holding frequent open home inspections so they can have a second - or a third - look.

On the auction day, make sure the home and garden are looking their best. Unless you’re using auction rooms, you’ll have the crowd standing in your grounds and facing your house. Trim and mow your garden, make sure external walls and doors are clean, and ask your agent’s advice on the most suitable spot to hold the auction.

Let your neighbours know that you’re holding an auction. It’s a courtesy to them to warn them that there may be a lot of cars in the vicinity, and hopefully they’ll come along and swell the crowd a little.

Many sellers find it too stressful to watch the proceedings, and it can make buyers uncomfortable too. Your agent will usually advise you to stay inside the house so that your body language doesn’t telegraph your position to buyers. Ask a friend or family member to stay with you and help calm your nerves, as it’s bound to be a stressful day.

Selling via auction can be exciting and rewarding. While there’s a lot of preparation leading up to the big day, it’s all worth it when you have that contract in your hand. But selling by auction isn’t the best choice for every property, so make sure you speak to your agent and get their expert advice.

To discuss how you can get the best price for your property, talk to the team at Peter Blackshaw Real Estate today.

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