Auctions are frequently a vendor’s best choice when there is a rising market, but is auction still a safe choice when sentiment turns and buyers have the upper hand?
As one of the industry’s leading auctioneers, First National Real Estate’s Chief Auctioneer, Matthew Harvey, makes a persuasive argument that auction is still the best way to achieve a premium result in the shortest period of time, especially now that conditions are more favourable for buyers.
‘Most vendors think that you need at least 5 or 6 bidders on auction day to be successful and that’s not the case. Auction involves a 3-stage process which gives vendors complete control over the marketing campaign and provides them with the opportunity to sell prior, on the day, or after auction,’ says Mr Harvey.
‘A critical ingredient of success is the urgency that an auction creates. Buyers need to complete their enquiries and have their finances in order, typically within four weeks, so the process reduces the potential for buyers to delay their decision making in the hope that a vendor will drop their price, below market value, in a bid to secure a sale.’
In the last couple of years, the strength of the market alone has been the catalyst for buyers making fast decisions and FOMO (fear of missing out) has been the main driver. There’s no doubt that May’s cash rate hike took some steam out of the market, and subsequent RBA increases to official interest rates will pare back the borrowing capacity of some bidders. Despite this factor, strong and decisive buyers continue to characterise the market, according to Mr Harvey.
‘The media plays a big role in confidence when it comes to the real estate market, however, quality, realistically-priced property is still selling well. Internet views of property have not subsided, which is where the proof of true intent lies, and although you are not getting excessive numbers of bidders at auctions, solid results are still being achieved.’
It is worth noting that in a changing market buyers become less committal and a deadline sale, such as an auction, brings buyers to the fore and compels their commitment.
Auctions also provide transparency for buyer and seller. If the property has been professionally marketed, the vendor will gain an understanding of what the market is willing to pay for their property throughout the duration of the marketing period, enabling them to set a realistic reserve. That knowledge is also critical to strategy should any post-auction negotiations be necessary. From a buyer’s perspective, an auction also demonstrates the level of market demand for the property they are pursuing.
Mr Harvey’s advice to anyone thinking of selling their property is to strongly consider an auction campaign.
‘Focus on the fact that auctions create urgency and offer a transparent way to find out what the market thinks a property is worth. It is, and always will be, the best way to assure you achieve market value in the shortest amount of time, so you can move on and secure your next property.’