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Selling at Auction

 

 

Selling by auction is a frequently misunderstood process and many vendors fail to even consider auctions due to their preconceptions. Auctions may not be the right option for everyone but it is important to fully understand the process to make an informed decision.

 

 

 

Why Auction?

 

  • Successful auctions can maximise sale price and minimise time on market.
  • Process allows buyers to develop an emotional attachment to the property before introducing the element of price.
  • Marketing the property without a price exposes it to more potential buyers.
  • Maximises competition through condensed marketing campaigns and a finite time period.
  • Allowing competition to drive sale price eliminates a ‘ceiling price’.
  • There are no cooling off periods, bids on the day are unconditional.
  • We treat selling by auction as a three stage process with the opportunity to sell the property during any of the three stages; prior to the auction, on the day of the auction, or after the auction.

 

 

 

Prior to the Auction

 

This stage of the process involves displaying the property to the market and is accompanied by an extensive marketing campaign. During this time the agent will get feedback from the purchasers as to their assessment of the price of the property and their level of interest.

 

 

A few days prior to the auction the agent will meet with you to discuss the feedback on the property and their expectations for the auction day. During this meeting you will also set the level of the reserve price and the vendor bid to be utilised by the auctioneer. The reserve price is the price level above which the highest bid at the auction must be accepted. The decision of where to set the reserve should be informed by price feedback provided by potential purchasers and the level of interest in the property.

 

 

During the pre-auction period there is no price attached to the property, however, purchasers still have the opportunity to make offers to purchase the property prior to the auction date.

 

 

 

Auction

 

The second stage of the overall process is the auction itself. On the day the property will typically be available for purchasers to view one more time prior to the auction commencing. All interested parties that intend to bid at auction are required to register before the auctioneer can accept their offer, this is typically done during this inspection time.

 

 

To commence the auction the auctioneer will begin by introducing the property and going over some legal requirements for the benefit of those in attendance. To get the bidding started the auctioneer will encourage opening offers from the crowd – this can be a nerve racking experience as bidders don’t want to give their intentions away. It should also be noted that the auctioneer is not obliged to accept any offers that they believe are not in your best interests and as such very low offers will be rejected.

 

 

If the bidding stalls at any stage the auctioneer can utilise the vendor bid in an attempt to stimulate further offers. Once bidding gets over the reserve price the property will be sold to the highest bidder at the fall of the auctioneer’s hammer. Should the bidding not reach the reserve price it will be ‘passed in’ and the highest bidder will have the exclusive opportunity to negotiate with the agent for the remainder of the day.

 

 

It is important to remember that the actual auction is only one stage of the overall process. If the property doesn’t sell on the day there is still a good chance of obtaining a successful result.

 

 

 

After the Auction

 

If there is a successful bidder on the day of the auction they are required to sign a contract and pay the full deposit (usually 10%). However, if bidding doesn’t reach the reserve price the highest bidder will often enter into a private negotiation to buy the property which will be facilitated by the agent.

 

 

If no sale can be immediately negotiated the property will typically be placed on the market with a price attached to generate new interest and competition. In addition to new purchasers we frequently find that this process generates interest from people who have previously viewed the property or those that have been tracking its progress. These purchasers may not have come forward during the auction campaign if they were uncomfortable with the process, were not prepared in time for the auction, or if their financial situation precluded them from exchanging unconditionally.

 

 

 

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