Have you ever purchased a property at auction? Have you ever sold a property at auction? If not, it’s a sale method that you might find ‘scary’ at first, but when you understand it you could find it hugely successful for you. In November 2017, around 18% of properties sold across New Zealand were sold by auction. However, this was a decline of over -31% year-on-year. While auctions have fallen in popularity across the country, particularly in the Auckland market, they are incredibly powerful in competitive, growing markets like Northland. Here’s what you need to know about them!
What exactly is selling by auction?
Selling by auction is an on-the-spot process of offering a property up for bid, taking bids from buyers and selling the property to the highest bidder. In real estate, it usually requires a short and intensive marketing campaign to give the property as much exposure and generate as much interest as possible before the auction day. Bidders must register to bid at auction and therefore already have the necessary pre-finance approval, making it a safe and secure process for sellers.
Do I have to sell if I’m not happy with the price?
Property owners can set a reserve price and if the auction does not meet or exceed this price, the seller is under no obligation to sell. A seller can lower their reserve price but cannot increase it once an auction has begun.
As a seller, can I bid to encourage price increases?
Property owners cannot bid on their own property if they are selling by auction, however your auctioneer may make ‘Vendor Bids’ on your behalf to build momentum. They can only make Vendor Bids prior to the bidding price reaching the reserve price.
What happens if a property doesn’t sell at auction?
If nobody has registered to bid or the property doesn’t reach the reserve price, the auctioneer will speak to the seller and negotiate privately between the seller and the current highest bidder to see if they will raise their bid to meet the reserve price. If they choose not to raise their bid and the seller is not prepared to lower their reserve price the property is ‘passed in’ and is no longer available for auction. From here, the seller and their real estate agent will discuss a new way forward whether it be taking the property off the marketing or continuing the property for sale via an alternative method of sale.
What are the advantages of auction?
- The market decides the price: Rather than guessing at the value of your home, and potentially placing a ceiling on what people will pay for it, auctions allow buyers to decide for themselves what a property is worth. This means you get a true market value for your home if it sells at auction.
- Signed, sealed, delivered: An auction sale is an unconditional sale, which means that once your home passes the reserve (set by the seller) and the auctioneer declares it sold, the paperwork is signed and the deal is done. This eliminates drawn-out contract negotiations, and is often the best option for anyone needing quick settlement terms for another purchase.
- Short and sweet: Auctions get maximum exposure for your property in a short period of time with a structured, intensive marketing campaign over a few key weeks. This approach not only creates a sense of urgency for buyers, but has the added advantage of meaning you won’t have to keep your house clean for months of open homes or agent visits, and you have a defined timeline to plan around.
If you have any questions about auctions for the Harcourts team or our auctioneer Anthony Gysberts, please feel free to get in touch!