Understanding the auction processes
Tips for sellers
WHILE greater numbers are choosing to go to auction every day, it is sometimes surprising to know how many buyers and sellers go into the auction process without fully understanding it.
There are some compelling reasons to choose auction over private treaty:
You have some certainty around when the house will sell (unless it is passed in).
Competitive bidding means no upper price barrier. A sale at auction is unconditional. Inspections are controlled through open house days or appointments.
Tip: Marketing the property
The auction process begins when the seller signs an authority with the agency that gives permission to take the property to auction. This process also involves the sellers signing off on the marketing plan presented by the agent, which is key to attracting potential buyers.
Whether the house is sold at auction or not, the seller will usually have to pay for the agreed marketing costs separate to the commission, (unless otherwise negotiated at the time of signing the contract).
Tip: Check agent’s credentials
Sellers should also take note of the agent’s credentials as only licensed real estate agents and auctioneers are trained to sell real estate and those who are members of the REIQ are bound by our Standards of Business Practice.
Tip: The auction process – three stages
Once the listing authority is signed, there are three key periods in the auction process.
The first is the period prior to auction day, when the marketing campaign begins, with advertising being placed and open houses being scheduled. It is advisable to have as many appointments or open days as possible (even though this can get tedious) as this is the key to attracting bidders at the auction.
Next, is the auction day itself. At this stage the seller will have a reserve price ready to pass to the auctioneer on the day of the auction. The reserve price is usually set using a comparative market analysis and in discussions between the agent and the seller.
If the highest bid reaches or exceeds the reserve price, the property is sold ‘under the hammer’ (i.e. - at auction) and the Contract of Sale is signed immediately by the buyer and the seller.
Should bidding not reach the reserve price the auctioneer will look to the seller for further instructions before ‘passing the property in’ (i.e. – not selling under the hammer). At this point the seller can reconsider the reserve price.
If the property passes in, the real estate agent will usually follow up all enquiries made before and after the auction day and continue to promote and market the property endeavouring to achieve a sale as soon as possible.
Overall, there are many pros and cons to buying and selling at auction and the number one golden rule to doing well at auction, whether you’re a buyer or a seller – is to do your homework and be prepared for all eventualities.