Where you choose to hold an auction can influence the outcome of the auction, the profile of the agency and even the growth potential of your business.
As Chris Wilson explains, it’s a decision that needs to be made strategically.
AUCTIONS: In-Room or On-Site?
Where you choose to hold an auction can influence the outcome of the auction, the profile of the agency and even the growth potential of your business. As Chris Wilson explains, it’s a decision that needs to be made strategically.
With the property market in most of Australia showing life again in the first quarter of 2010, auctions have again become a popular way of selling property. Because of this it is timely for agents to revisit the old question: “Should we hold our auctions on-site or in-rooms?”
There are some states where on-site auctions have always been the way to do it, but in other states, such as New South Wales, we have seen a move away from in-room auctions to on-site auctions, whereas in South East Queensland there has been a move from holding auctions on-site to holding them in-room – why?
One of the main reasons given by many agencies for holding auctions on-site is that they perceive that by doing it this way they have a higher profile for themselves in their market, whereas they feel that in rooms their profile becomes dissipated, especially if they are auctioning with other agencies in their group. In my view this perception has arisen because of the popularity of so called “lifestyle” shows where auctions were featured as entertainment. For this reason many agents only offer the option of on-site auctions. To them, large crowds at an on-site auction give the impression that there is a great deal of interest in the property and agents use this to boost their popularity in an area. This is great in boom times when the papers are full of success stories, but what happens when the market suddenly goes quiet? We have seen many an on-site auction fail because registered buyers can see there is no opposition and sit back and wait, don’t bid and then when the property is passed in the agent has a dilemma: do they negotiate with the interested parties, or do they rush off and do their open for inspection, which is scheduled soon?
One of the greatest drawbacks for on-site auctions is that everything for that property is on show. If it goes well, it’s great. If it doesn’t, then many perceive it as a disaster. For this reason, many agents pull back from suggesting auction when the market cools because they become intimidated by the possible outcome.
Five benefits of in-room auctions.
1. Control. Organised correctly, in-room auctions allow agents to show their best at all times. They control the “room”, the atmosphere and present the properties at their best. The agent is not a slave to weather, traffic and all the other variables outside of the agent’s control. As our cities become more congested, it becomes harder for auctioneers to get around the city on a Saturday to service their clients, and this is reflected in their charges. Saturday traffic in some areas of Sydney is now more congested than during weekday peak hours. An auctioneer arriving late for an auction reflects badly on the agent, and in some cases could create friction between the agent and the vendor, especially if the bidding is below the vendor’s expectation. With unpredictable weather and serious weather events more common, on-site auctions can be a problem when the weather turns nasty.
2. Exposure. Anyone interested in a particular property has no idea what their competition is until the bidding starts. It puts all the pressure on the potential bidder to perform. Even if the property is passed in, the fact that there are a large number of people present, masks the actual interest for the property and this can work to the benefit of the vendor and agent alike. A bidder who misses out on one property, may become interested in another passed in property, and buy it as a direct consequence of attending the auction. Auctioneers who call a lot of in-room auctions have plenty of war stories where this has happened.
3. Cost. Generally auctioneers charge less for an in-room auction than on-site.
4. Time management. One trend we have observed as auctioneers is that since bidders’ registers were introduced, on-site auctions are taking longer. Even if you were able to organise them effectively, the problems of logistics becomes a nightmare as support staff are rushed off their feet getting from auction to auction or the salesperson getting from auction to opens or vice versa. If the calling of one property runs overtime then the problem cascades to the other auctions or opens held that day. If you limit the number you do in any one day then you limit the amount of stock you can handle, as well as your income.
5. Business growth. There is a limit to how many on-sites you can conduct on a Saturday. In winter if you start at 11am at the earliest and finish at four, then on one day you can only run six auctions, and a few more in the summer months. For in-room auctions the only limit is the number of properties you want to auction on any one day. Auction lists for in-room auctions can run as high as 25. You can run in-room auctions monthly, fortnightly or even weekly, the only limit is the amount of auction stock you wish to carry.
In summary, the major benefit to agents and agencies alike is that with in-room auctions the agent is in control of all the variables. This works to the benefit of all, including the vendor. Having said this, it does not mean that on-site auctions don’t have a place. Good agents will weigh up the pros and cons of each method and decide what is best for their business. It may be one or the other but also may be a combination of both.
Whatever you decide is best for your business, weigh up the benefits and the costs. Don’t just blindly follow what your opposition does, or what is popular on TV. Remember, whatever you decide, with auctions comes a better profile and success.
Chris Wilson BA (Econ) is the Compliance and Training Manager of Think Real Estate www.thinkrealestate.net.aua specialist provider of training, compliance and support services in the Eastern states. All trainers and assessors at Think Real Estate are qualified real estate agents with extensive practice experience and industry knowledge.
Chris Wilson BA (Econ) is the Compliance and training Manager of Think Real Estate www.thinkrealestate.net.au a specialist provider of training, compliance and support services in the Eastern states.