The sellers guide to auction success.
For the uninitiated, the auction process can seem a little daunting, but there are many advantages. Here are the top five:
- Transparency. Everybody knows the terms and conditions of sale before they start, and bidders or their representatives are on site during the auction bidding in the open.”
- Your terms. An auction means you set the terms and conditions of sale, mitigating the chances of any surprises at settlement.
- Cash-in-hand buyers. Marketing with no fixed price broadens the pool of cash-in-hand buyers who will look at your property.
- You have a ﬁxed, relatively short marketing period. In this time your Harcourts sales consultant can gauge the level of interest in your property and what prospective buyers might be prepared to pay.
- Compels decision-making. The auction itself generates a sense of urgency and competition, which brings buyers to a decision.
What to do to prepare:
Your sales consultant should walk you through a detailed marketing plan from the images that’ll be selected and advertised, the copy that will be included, and the schedule of open homes, to where the property will be advertised. You should have daily updates from your consultant and a face-to-face meeting once a week, to make sure you’re up to date. They should also provide you with a written report on the marketing campaign and interest from prospective buyers.
Talk to your sales consultant about what is happening in the market, specifically around your area and with properties similar to yours.
Use that market information, and feedback from prospective buyers to set a realistic reserve price. Be clear about your best price, which is the figure you’d be very happy to accept. But also have in mind your “OK” price and your “accepted price” – which is the figure you wouldn’t be thrilled with but given market conditions you’d be prepared to accept.
At all times during an auction, you’re in control as the seller. If a bid is high enough take it. If not, don’t.
REMEMBER: The reason for not taking an offer needs to be greater than the reason the home is on the market in the first place.
Before the auction
Auctioning your property is about so much more than simply showing up on auction day. There’s a lot that goes into it before-hand to ensure you achieve the best result possible for your property. Marketing your property well is chief among the things you’ll need to do. Your agent should walk you through your marketing plan in detail, from the images that’ll be selected and advertised, the copy that will be included, to where the property will be advertised (online, papers, brochures, in office).
Before you go to auction, you should expect to hear from your agent on a daily basis and a face-to-face meeting around once a week. Ideally, you’d receive a written report which summarises all of these activities as well as the interest in your property. Your agent should also be keeping you well-informed of the market, so that you can make the best decision come auction day.
Know your auctioneer
Your sales consultant will normally have one or two auctioneers they work with regularly so to make sure you are getting the best auctioneers make sure you hire a real estate company with a strong auction culture.
Talk to your sales consultant and your auctioneer about how often their company promotes auctions as a method of sale, how many auctioneers the company has working for it, and what kind of ongoing training their auctioneers receive.
Ask your auctioneer how many auctions they have called, how often they’re calling auctions and how many of those reached reserve.
If you want to get a clear idea of an auctioneer’s performance attend another auction they are calling. This also has the added benefit of familiarising you with the auction process without the stress of it being your property under the hammer!
At auction an auctioneer should demonstrate a clear knowledge of the property for sales as well as legal proceedings around the sale and explain these clearly to those in attendance. They should be able to easily answer any questions from bidders.
Most importantly they should be fast and accurate in keeping track of bidders – who’s bidding what, and who holds the current bid.
Auctions can be high pressure environments and part of the auctioneer’s role is also to help diffuse some of that tension so potential buyers are relaxed and focused on the auction and their bids.
Ahead of the auction your auctioneer should meet with you as the vendor in person to make sure they have a thorough understanding of the property, and your reserve price. Harcourts NZ has an incredibly strong auction culture, with our team of auctioneers often dominating the finals and winners' podiums of national and international auction competitions.
In the words of Harcourts NZ CEO Chris Kennedy, himself an auctioneer:
“You want your auctioneer to be match fit. That means you want them to be constantly calling auctions, to be across the market, and to be prepared to work hard to get you the price you want.”
What is your role on the day?
If you’re in the country, the best recommendation is to attend your auction. It’s great to have you there if there are any last minute questions. Some common ones buyers ask are: “Can we vary the deposit amount?” or “Can we vary the settlement date?”
Your auctioneer will also want to confer with you depending on how the auction is going. If bidding stops below your reserve price for example, your auctioneer will want to discuss next steps with you.
Getting to know your property
The auctioneer should be introduced to your property, much as your agent has been. They should walk through the property, understand the features of the home, and really understand why a buyer would fall in love with it. That way they’ll be able to better represent your home to buyers.
Your auctioneer will also want to know all about the interest the property has received. They’ll ask your real estate agent detailed questions about it. How many inspections have there been? What kind of interest has the home received? Have any valuations been done? Any building/pest inspections? Does the buildings age suggest a dampness or infra red test for water damage be conducted? Is the property fibre ready?
When it comes to marketing your property before auction, the rule seems to be more is more. The success of your auction can be largely dependent on your marketing campaign.
The latest research from Harcourts, showed a direct correlation between the amount spent on marketing versus how much interest was generated for a property, and what price it sold for. On average, properties that sold in the shortest timeframe invested a further $1,913 in marketing than those that did not see a sale in the 45 day period.
Our Harcourts Promise and written marketing plans ensure a smooth marketing campaign and that you receive feedback on what prices buyers are indicating they are willing to pay for your property.
The reserve price
It’s important for you to understand and be clear on what your reserve price is, and how it’s used during the auction. Your auctioneer should be able to explain this to you in detail. You will need to discuss your reserve price with your auctioneer. They should be working to ensure you get the best price possible for your property.
That being said, try to avoid openly discussing price with others, to reduce the risk of price leaking out into the market. The auction should focus on the product (your home), and price should become secondary.
Harcourts CEO, Chris Kennedy believes there are three types of figures to consider before the day:
- Your happy price – The figure you'd be very happy to accept.
- Your ok price – The ﬁgure you'd be ok with based on the feedback you've received, you don't see a win but you don't see a loss.
- Your grumpy price - This last figure is basically the one you wouldn't be thrilled with, but given market conditions, you're prepared to unhappily sell at that price. Remember, at all times during an auction, you’re in control. If a bid is high enough take it. If not, don’t. But the reason for not taking the offer needs to be greater than the reason the home is on the market in the ﬁrst place.
Frequently Asked Questions
What if no one registers for/turns up to the auction?
Harcourts Auctioneer, Andrew North says, in reality, this isn't something that happens very often. Both you and your agent will know well before auction day how much attention your property has received and how much interest there is, giving you a good indication of how many bidders are likely to show on the day.
What if nobody bids?
It’s understandable that buyers might be nervous during the excitement and pressure of an auction. This is why it’s not uncommon for an auctioneer to be met with silence when asking for an opening bid. Most people are waiting to see what others at the auction might bid. In the event that no one calls out an opening bid, the auctioneer will nominate a starting bid to get the ball rolling.
What if the reserve price is not reached?
In this event, your auctioneer can pause the auction and come and speak to you, the seller. They will go back to the current highest bidder, and ask if they’re prepared to increase their offer to a price at which you’re prepared to sell. If the bidder is not prepared to do that, your auctioneer will then see if you’re prepared to lower your reserve price. That’s why it’s important for you to have a price in mind that whilst you wouldn’t be entirely happy with, you are prepared to sell at. If neither of these scenarios happen, then a sale cannot occur, and your home will be what is called ‘passed in’.
What happens when the property sells?
After the sale, it’s time to focus on the buyer. Your auctioneer should take them aside to start looking at the paperwork and get the contract signed straight-away. It’s also time to look at how the deposit is going to be paid. As the current owner, you’ll then sign the paperwork, and the sale has concluded.