Auction or Sale

[JulieW]

What are opinions on best return by selling methods - auction or private sale?

Does either method enjoy better prices in rising markets?

Is it dependent on the RE agent, or is one method better?

Is doing your own sale like the old adage ' a client who represents himself has a fool for an attorney).

This has probably been covered before but I can't find theads so apologies if its been done to death. (and no messages about 'don't know never sell'. I know. lol)

 

[The Y-man]

We always went auction, then fell back to private sale if it didn't sell.
Auction fees are only a few hundred dollars.

Cheers,

The Y-man

 

[JDM]

Ultimately it depends on the market and the product.

The fundamentals of an auction are that two parties will big against each other to ensure they get the property as that property is the one for them. The more unique a property is, the less opportunity the purchaser has to walk away from an auction and go buy a similar property down the road thus motivating them to bid higher at auction.

From this you find downfalls:

Unique doesn't mean desirable - A unique property that doesn't have appeal will fail to achieve the two bidders required

Slow Market - Once again, lacks the two bidders

Not unique - There is no need or desire to pay above market price for a property if you can walk down the road and buy something similar at market price.

As a general rule; we will only auction a very unique property as we believe a private sale results in the best outcomes for the owner. Auctions are great for agents, however not quite so great for vendors.

Keep in mind, a lot of buyers are not in a position to buy under auction conditions and as such an auction is reducing your pool of potential buyers.

 

[Fudge]

We always went auction, then fell back to private sale if it didn't sell.
Auction fees are only a few hundred dollars.

Cheers,

The Y-man

Are they Yman?

I don't know, but I thought on the Sunny Coast they were around $5000. That is why I thought Auctions weren't as popular up here than down South?

Cheers,

F

 

[Fudge]

As a general rule; we will only auction a very unique property as we believe a private sale results in the best outcomes for the owner. Auctions are great for agents, however not quite so great for vendors.

I had assumed this Joel.

I have heard some nightmares regarding auctions, and opening your house up for open times.

Cheers,

F

 

[Hoffy]

Neil Jenmans book "Don't Sign Anything" has a great chapter on "Auctions - trickery and deception on a massive scale". Well worth a read.

 

[The Y-man]

Are they Yman?

I don't know, but I thought on the Sunny Coast they were around $5000. That is why I thought Auctions weren't as popular up here than down South?

Cheers,

F

I am assuming Julie's property is in Melb, so speaking from my experience here with 3 different agents, the auctioneer fees were pretty much a few hundred dollars.

Cheers,

The Y-man

 

[The Y-man]

I have heard some nightmares regarding auctions, and opening your house up for open times.

My view is that you need to open up your house for inspections auction or not - I am much more likely to look at a property that didn't have an "Open for Inspection" and had a "call to arrange" - mainly so I could gauge the level of interest.

Cheers,

The Y-man

 

[The Y-man]

What are opinions on best return by selling methods - auction or private sale?

Julie, at the end of the day, as a buyer, which method do you see as most effective? As you look for properties, which method do you feel generates highest prices - you know, where you look at a property and think, "Nice, I'd pay $x for it...." only to find it sells for $50k more....

Cheers,

The Y-man

 

[marky_mark]

Neil Jenmans book "Don't Sign Anything" has a great chapter on "Auctions - trickery and deception on a massive scale". Well worth a read.

I heard a few years ago that Neil Jenman had a property in Collaroy (Northern Beaches of Sydney) and although he had a couple of his Jenman Approved agents working in the immediate area he actually sold his house through LJ Hooker at an Auction.

 

[Perp]

As a general rule; we will only auction a very unique property as we believe a private sale results in the best outcomes for the owner. Auctions are great for agents, however not quite so great for vendors.

Keep in mind, a lot of buyers are not in a position to buy under auction conditions and as such an auction is reducing your pool of potential buyers.

Spot on, IMHO. Here are Jenman's reasons why he thinks auctions get lower prices (I don't necessarily agree with all of it, but for what it's worth):

http://www.jenman.com.au/BS_S_Auctions.php

We always went auction, then fell back to private sale if it didn't sell.

I don't think that's a great strategy. I guess if you're happy with the auction outcome, great, but going to private sale already labelled as a "failure" means that:

1) You're already a bit disheartened about selling the property and already partly conditioned to take a lower price, and

2) Most buyers consider you a desperate seller, and will use the top auction bid as the "starting point". Which is not good, because you presumably want substantially more, but buyers will, psychologically, want to get it for less.

You never want to be selling when you're disheartened, if you can possibly avoid it. The reason they say "the first offer's the best offer" is because you're in your strongest possible position shortly after listing (or deciding to sell). The more time passes and the property doesn't sell, or the more "failed bids" intervening, the weaker your position becomes.

 

[Fudge]

Spot on, IMHO. Here are Jenman's reasons why he thinks auctions get lower prices (I don't necessarily agree with all of it, but for what it's worth):

http://www.jenman.com.au/BS_S_Auctions.php

Great reference.

I will never sell my house at auction or have open houses. They will all be via booking with agent.

I can relate to Jenmans story (namely Point 7 in his article titled....Deception) to an auction I went to see recently. It was a beautiful higher end house in the Sunshine coast Hinterland. We enquired about it the day before the auction (as only saw the add in the paper the night before). He suggested this house would have a value around the $800,000. After hearing this, I knew that this was underpriced, so went to the Auction the next day (a Sunday) to buy it.. We were going to pack up our house and move in if we thought it wouldn't go higher than $800,000.

Anyway, once we went and walked through the property, we realised how fantastic it was. The auction started and the first bid was $1.3M but got closed in as only one person (out of about 50) was prepared to pay for it. The reserve price was $1.8M.

The agents just pocketed the few $,000 dollars for a mornings work.

Moral of the story.....................Agents are sleazy!!! (I better change this to say most of them are!!)


Cheers,

F

 

[buzzlightyear]

Its horses for courses..

Not much of an answer I suppose, when you say it depends.

However, if its in Melbourne inner-suburb, a relatively unique product, strong market, house moreso than an apartment, I have always been a strong advocate, based on seeing many auctions, that they are clearly the best method to sell a property. Yes, there can be exceptions and different scenarios may dictate a different option.

Melbourne has a strong bias for auctions unlike other states, so this advice or opinion cannot be easily transposed for these other locations.

As for auction fees, over the past 12 months, I have had two (2) properties that I have had agents provide schedule of fees for selling a property. I have never had an extra 'auction' fee, nor has that fee been hidden elsewhere from what I can see. And I have never seen this for many many years in my general interaction with REA's.

 

[wylie]

We enquired about it the day before the auction (as only saw the add in the paper the night before). He suggested this house would have a value around the $800,000.

This is a concern, if the agent was telling ANYBODY that a house that has a reserve of $1.8M would "have a value around the $800,000". No wonder some agents get a bad name. He probably didn't know the reserve, but surely he couldn't have got it wrong by $1M?

The agents just pocketed the few $,000 dollars for a mornings work.

Curious to know how the agent pocketed a few thousand dollars for a passed in auction?

Moral of the story.....................Agents are sleazy!!! (I better change this to say most of them are!!)

I know a LOT of agents and seriously don't know many who are "sleazy". I don't think you can tar them all with the same brush.

 

[The Y-man]

2) Most buyers consider you a desperate seller, and will use the top auction bid as the "starting point". Which is not good, because you presumably want substantially more, but buyers will, psychologically, want to get it for less.
.

That's why you always pass in on a vendor bid


Cheers,

The Y-man

 

[Fudge]

It was exactly like what Jenman says in his Point 8 as well. (8. SELLS TO THE WRONG MARKET)

I know a LOT of agents and seriously don't know many who are "sleazy". I don't think you can tar them all with the same brush.

Yes,

Fair point Wylie....That is why I added the bit in brackets.......I better change it again to say "some".

Cheers,

F

 

[JulieW]

Thank everyone. Great thoughts to go with.
Thank too Y Man - pass in on vendor bid - That sounds promising.
Is that actually a legal tactic?
How does one approach the auctioneer with this strategy?

 

[wylie]

Fair point Wylie....That is why I added the bit in brackets.......I better change it again to say "some".

That's much better .