Is Auction the Best Strategy? 3 Times it Just Isn’t.

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All posts / For Sellers / General: Real Estate

Auction. The pet sales strategy of the real estate industry, and one that evokes emotions in sellers ranging from excitement and anticipation to trepidation or even terror.

Are you trying to decide whether or not you should take your home to Auction?

Is Auction the right process for your property and for you personally? Can you predict your likely outcome?

There are articles for Africa touting the benefits of the Auction process but what you probably want to know is when you shouldn’t take your property to Auction.

When would a different strategy give you a better outcome?

Here are three scenarios that should make you reconsider the wisdom of taking your property to Auction.

1) Clearance Rates are poor in your location.

What is a clearance rate?

A clearance rate is the percentage of homes that are selling prior to or at Auction.

A low clearance rate indicates that, by and large, the local market is either unwilling or unable to bid at Auction and a different approach is likely to get you a better outcome.

A couple of points about agents and clearance rates.

Now some smooth operators will include properties that sell after the Auction in the clearance rate they quote you. Unless these sold to a buyer who commenced negotiations on Auction day this is pretty cheeky and a bit duplicitous.

“But I’ve been told Auction is a three-stage process. Plenty of homes take longer than 28 days to sell.”

It is a three-stage process and some homes take longer to sell than others.

But if most homes are selling in the third stage, why go through the first two? Why not use a more effective strategy from the get-go?

“Clearance rates in my suburb are low but the agent and their office have an impressive track record at Auction.”

An impressive clearance rate for an agent, office or brand may give you confidence but, for the purpose of evaluating strategy, doesn’t have much to do with anything unless it is current and local to your property. Refer back to #1.

Current buyer behavior patterns in your geographic area are a better predictor of market engagement than your agents personal best from three years ago on the other side of town.

Hot Tip: If you want to do some sneaky recon at clearance rates check out the Residential Auction Results on www.interest.co.nz. My caveat is that not all brands are represented here so, if a major player in your location is missing and tends to run a lot of Auction campaigns, your picture will be incomplete. Have a look and ask your agent to fill in the gaps.

2) Your target market is struggling to secure financial pre-approval.

If your target market is struggling to secure unconditional financial approval then your Auction campaign has flopped before it has begun.

Think about who is likely to buy your home.

Your agent should be able to give you an overview of what is going on across the marketplace and whether or not securing unconditional finance is likely to be an issue for your buyers.

Ask about the majority of buyers in your target market.

If there are 10 buyers for your home would you really want to use a strategy that eliminates 8 of them? Even if you did sell at your Auction, wouldn’t there be a niggling concern that you might have achieved a higher price using a more inclusive strategy?

Note: Like a third party opinion? Your mortgage broker can be a good source of information here. If your target market is First Home Buyers, ask if they are finding it reasonably easy to secure pre-approvals. If your home is an upgrade (second home or similar) ask if many people are organizing bridging finance.

3) There is something polarising about your property that shrinks your market.

If something about your property is going to worry buyers or if they are going to need to carry out expensive due diligence then you may want to use a strategy that puts less pressure on them and allows them adequate time to put any fears to rest.

Think like your buyer.

What kind of homes am I talking about?

A couple of examples are homes with monolithic cladding built in the weather-tightness risk window or homes with extensive non-compliant works.

Buyers are often reluctant to spend substantial amounts of money on pre Auction due diligence when they aren’t sure that their money will buy your property, particularly when a property is perceived as ‘risky’ or requires extensive investigation.

Choose a strategy that makes it easy for people to consider your property.

Scared people seldom pay high prices and if your choice of strategy puts your property in the ‘too hard’ basket buyers may simply go elsewhere.

Give your buyers time to work through their uncertainty and you are much more likely to achieve a satisfactory and timely outcome.

Two final points.

There is no ‘one size fits all’ when it comes to strategy.

When in doubt, ask for more information. The most important question a seller can ask a real estate agent is “Why?”

Good luck with your sale!


More posts for sellers.

Smart Ways To Deal With Stupid Offers
Breaking Up With Your Real Estate Agent. Is It Them Or Is It You?
Separation And Selling The Family Home


Have feedback for me? Or a question? I’d love to hear from you. Give me a call on 021 454694 or email me here.

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Dawn at Mission Bay

The Author

Maria is a veteran Auckland realtor, rookie blogger and long time resident of the West and Nor'west. Maria markets and sells residential and lifestyle property across Auckland and is based at Harcourts Northwest Realty Limited - Licensed REAA 2008

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