Why Auction in Today’s Market?

Why auction in today’s market? We auction property to create urgency, give the seller the opportunity for competition to achieve a premium, reduce days on market and give structure to a selling plan.

Why auction in today’s market?
I often get the question from clients, “Is this an auction property?” or comments such as “It isn’t the sort of property that is suited to auction”. Here the thought process is that you need 2, 5 or 10 people interested in the property for it to be a successful auction. In my view this is one of the biggest misconceptions about the auction method of sale. Auction is exactly that – a method of sale. It brings the intentions of buyers and sellers to a close on a given day in a set period of time. Having five or ten registered bidders at an auction and it selling for $50 – $200k over the reserve is an obvious byproduct of the process, but it is NOT the sole reason we auction property. We auction property to create urgency, give the seller the opportunity for competition to achieve a premium, reduce days on market and give structure to a selling plan.

The facts are that properties that are auctioned are sold in less time than properties listed by any other method of sale, including private treaty, expressions of interest, tender etc. The days on market are considerably lower for auction properties. As agents we get caught up in what a vendor’s expectation might be, rather than delivering to our sellers the market feedback throughout the inspection period.

One of the arguments we are finding coming up regularly at the moment is that “the auction market clearance rate is very low so why should we auction our home?” It is a valid comment to make. Our company’s clearance rate has gone from a high of 78% in 2007 to a low of 42% in 2008. Our clearance rate for 2008 is 47%. This includes all properties that are booked for auction with our business. The clearance rate you don’t hear of though is the rate that shows how many private treaty properties sell in a four week period, the same time the auction clearance rate is calculated. There is no doubt that if we were able to calculate this rate it would be substantially lower to that of auction.

So why auction today? As an agent, if you want to increase your profile in the market place, increase your productivity, get more properties sold in a shorter period of time and have a structured selling plan, then you need to adopt the auction method of sale. It is important though that you know what you are doing and are diligent throughout the process. It is not a failure if the property does not sell at auction. You have three chances to sell it. Before auction, at auction or after auction. It is interesting to note that our number one and number two auction listers that we sell for are now listing and selling more properties today than they were the same time in 2007. They understand the importance of the process and that it is critical now to succeed.

What is more evident in today’s market is that buyer work and building buyer relationships are absolutely critical. Agents need to nurture these relationships and build trust and rapport to achieve sales. Honesty is paramount.

Pricing has also become challenging. What is a property worth? The issues financial markets all over the world have faced over the last 6 months have been widely publicised. This has caused disruption to our real estate industry in Australia, particularly in the top end of the market over the last month. We have seen values come off and buyers disappear due to losses in the share market. The important thing here for agents is, the market is the market. We can’t change the market. We need to adapt to the market and focus on what we can influence and that is a diligent campaign, increase buyer work and present the property better than its competition and be priced better than its competition. We need to give accurate feedback to our sellers and create the urgency for a result to take place on auction day.

I believe that many agents and sellers don’t understand the importance of a professional auctioneer. The role an auctioneer plays in the sale is critical. They can make a sale or break a sale. Not only are they a public advertisement for the agency, they have the ability to change people’s lives. A good auctioneer will sell a property but a great auctioneer will achieve a premium result. There are so many factors that come into play in a 15 minute period and it is the auctioneer’s responsibility to react to each situation accordingly. You need to keep control but also have empathy.

In NSW the vendor is entitled to one bid and only the auctioneer can place that bid so you need to know when it might be the right time to use it. You need to know when to apply speed to your call and when to slow down. You need to know when to increase volume and when to be soft or quiet.

Auctioneering is a craft and not an easy assignment. I have been fortunate to work with and compete against some of the best auctioneers in the country, and our team is now amongst those. We pride ourselves on our ability to achieve the best possible result and our professionalism is second to none. Think about who is auctioning your home before you let someone take charge of your most valuable asset.

Damien Cooley started Cooley Auction Services www.cooleyauctions.com.au in 2003 with one clear vision – to put together the best auctioneering team in Australia. Damien won the Australian Property Institute’s Young Achiever of the Year Award in 2007 and was a finalist in 2006 and 2004. He was also a finalist in the Real Estate Institute of New South Wales Award for Excellence in Auctioneering in 2007, 2006, 2005 and 2004.

To view a video highlighting online auctions by PTy Auctions click here.

Damien Cooley

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