With clearance rates dropping, volume of buyers on the wane and the logical price of the market drifting further away from vendor expectations, the general ritual has been to move away from the auction process and head towards private sale.
The main message being sold to vendors currently is to offer ‘greater control’ over the process by looking at offers from the very beginning and negotiating from a certain price with buyers.
That combined with the fear of an auction ‘failing’ to sell under the hammer and the issues that can create.
But this default position isn’t considering the resulting buyer behaviours that come from this changing tide so instead of running away from auctions, maybe we need to head towards them.
Using the right method to create the right pressure on the right person
With fewer buyers in the market to compete against, it’s safe to say that the pressure on buyers to act is dissipating.
With increasing interest rates, the pressure is also starting to mount for those hoping to sell, and days on market are on the rise, which only serves to increase anxiety.
All of that is obvious (I hope), but when you look at that consumer sentiment the question that needs to be asked is, ‘What are you doing to attempt to recreate the pressure that pushes buyers to pay an ‘emotional tax’ over the logical value?’
You need to do something to form some sort of fear of loss in buyers to combat the current FOOP (fear of over-paying), and I’m not sure that a private sale is the most ideal way to go when you consider how you can look to flip the script on what’s happening.
Buyers: quality over quantity, but far from non-existent
Irrespective of any market changes, it’s safe to assume that at a certain price there will always be a conditional buyer for a property (subject to finance, inspections etc). The world may feel like it’s on its backside, but it is still turning and, as a result, people will always need to buy houses!
Yes, a private sale might feel like a ‘safe bet’, but it’s not like you’re doing your vendors a favour because you’re fishing for buyers that we know will be there, and all we’re doing is getting ready to dive down in order to find them.
The number of those ‘Grade A’ buyers, i.e. the unconditional ones, has certainly dwindled but it’s not to say that they aren’t there so why not try to find them?
You have a choice here…do you simply yield to a falling market because it’s safe? Or do you give your sellers a fighting chance by doing what you can to take it to that market?
Providing two opportunities to create FOMO
I’ll preface this bit by stating a fact: An auction was never designed to drop the hammer down on every property.
It was designed to ensure that the most is being made from the asset, and when used as part of an overall process, it’s ultimately irrelevant whether the sale happens on auction day or not.
As I mentioned earlier, the inherent concern is that the property doesn’t sell under the hammer and the campaign is seen as a failure, but the reality is that true professionals don’t fear a pass-in because you have control over the entire process.
You don’t win or lose, you win or learn.
You learn more about what the market is prepared to pay and therefore you have moved your sellers closer towards an outcome.
The first opportunity to create that fear of loss in buyers is with the transparency of competition in an auction.
However, while the campaign’s running what’s stopping you from creating a second wave of competition with your conditional buyers?
Run two-bidder registration sheets
An unconditional one for the auction, and a conditional one for the second it passes in (if it passes in).
Humans always tend to want what they can’t have, so by committing to the auction you can say to the conditional buyers that they won’t be entertained until it passes in.
But offer them the next best thing – a spot on the VIP list that gets the priority call over any other conditional buyers should the property pass in.
Keep them warm by communicating useful information and be sure to tell all of them that it’ll be first in, best dressed.
Or better still use an offer communication platform to put all of those conditional buyers back into a competitive arena online, have them pre-loaded and press ‘go’ once you’ve passed in.
If you have thought ahead, planned ahead, and explained those contingencies to your sellers, there is no ‘edge of cliff’ moment.
There is a seller that appreciates that their agent hasn’t simply yielded to the changing market.