28th September 2022 / Sarah Lowry: Why Auction in a Changing Market?

After an explosive period in late 2021, where auction volume records were smashed almost on a weekly basis, we are now back to much more moderate levels. Interestingly though, the top performers, the skilled and seasoned exponents of the auction process, actually double down on listing everything for auction.

They understand the essential leverage the auction process creates for them, and they know how to utilise the process to achieve swifter and better results even in softer market conditions. Auctions serve a vital purpose by creating a timed imperative for interested buyers to engage with a property. They create a reason for buyers to act.

So, in this new and changed market, the purpose of booking an auction is not necessarily just about filling up the street with buyers fighting it out; it is about giving buyers a reason to engage and act in a timely manner to cause a successful sale.

In a hot market:

• Buyers are more motivated and confident to compete and secure a home.
• They also know the market is going up, so they act with confidence around the price, knowing the property will be worth more than what they are paying today in the coming months and years.

In a cooling market:

• Buyers are far less committed and far less confident. They will only do a deal if the price is right.
• Buyers are gripped with caution and fear because they sense the property may be worth less in the coming months and years as the market falls.
• Their mentality is that if they don't buy a property today, they will find another one potentially better and cheaper in a month or two's time.

The result is that in a changing market, it is far more challenging to get buyers to engage, make offers, and actually do the things they need to do to buy. In an auction campaign, an interested buyer is fully aware that as the auction date looms, they really do need to act if they are interested in buying this particular home.

Therefore, the timed nature of an auction campaign creates impetus to engage. On many auction properties, it is actually the looming auction date, or indeed auction day itself arriving, that finally forces an interested party to come to the negotiating table.

The huge benefit of auctions in both hot and cold markets is that there is no better leverage than competition. The social proof of seeing others interested at the same level is the most powerful tonic to breed confidence around price amongst buyers in all conditions. This is particularly valuable in cooler markets where buyers are otherwise very tentative on price.

This is the ultimate recipe to give your buyers the confidence to act strongly on price. An auction makes that competition clearly visible to the buyer. The auction process also offers flexibility by offering a variety of levers to pull to create action from buyers by:

• Adding, removing, or adjusting a price guide.
• Bringing an auction date forward or pushing it back.
• Instigating competitive from pre-auction offers from multiple parties to sell prior.
• Offering a more nimble process allowing the agent to pivot when needed on price, timing and strategy, without damaging price perception around the property.

In a changing market, some properties will sell on auction day; some will not. That's a reality. What we often observe, though, is that where a property does not sell on the auction floor, we quite frequently see offers and interest being forthcoming in the hours or days immediately after the auction. So even passed-in auctions are causing activity, creating engagement, and bringing campaigns to a head.

A passed-in auction often causes rapid price alignment between buyers and sellers. The key is to get past thinking that the selling on the auction floor is necessarily the endgame. Getting the property sold in a timely manner for the best price possible is the endgame. Whether that happens on the floor, prior or post, is irrelevant.

An auction sale is about putting a process in place that causes a successful sale in the most timely manner while providing maximum flexibility and leverage. In addition, serious vendors will need to be realistic about their price expectations and ensure they have a quality marketing campaign behind the property in what is likely to be a more competitive selling environment.

For more information how we can maximise the value of your property, do not hesitate to give us a call.

Source: realestatebusiness.com.au