Most real estate agents will tell you selling your home at auction is easy! In a way, they’re right. Auctions create a sense of urgency. There’s a limited time frame, around three or four weeks which hopefully weeds out the tyre-kickers, leaving qualified cash buyers.
Selling your home by tender or at an advertised price can take at least forty days, if not longer which can add real stress to your situation. Many would argue that auctions are the best way to sell a house because they also negate the risk of offers falling through based on common clauses such as: subject to finance, LIM or a building inspection. Potential buyers have to do their due diligence prior to auction day, not after.
Benefits of auctions
Listing a price on a home can be seen as a barrier by some. Many won’t attend an open home if they believe that they can’t afford it. Selling by auction removes that perceived barrier and encourages people to have a look, imagine living there and, often, pay more than they planned.
Homes have sold for well over their capital value (CV) because opposing bidders have both fallen in love with a property and ‘just have to have it.’ Prior to auction day, if someone falls in love with your property they can place a pre-auction offer. Should you decide to do this, then the auction is generally brought forward. A good agent will contact all those who have interest in the property letting them know that a pre-auction offer has been made and the new auction date. What this means is that you, the vendor, could still end up with a higher price if one of these interested parties decided to bid.
That’s the best case scenario and it works for many people. If for whatever reason you’re looking to sell your home fast, the market is red hot, or you’re confident a number of parties are very interested in your property going to auction may be your best bet.
Housing shortage
It’s no secret there’s a housing shortage in New Zealand. Basic economics dictate when there’s a high demand and shortage of supply, prices go up. This means auctions are becoming more popular (particularly in Auckland) to capitalise on the increased competition. Of the 20,180 auction sales in the 12 months to March 2016, 63 percent of those were in Auckland. It’s a drop from the 78 per cent of national auction sales for the year ending March 2015, but it’s still well over half of all properties sold in New Zealand. Waikato/Bay of Plenty, Wellington, Canterbury/Westland, Central Otago Lakes and Otago districts all saw new record levels of auction sales in the year ending March 2016, so Auckland’s percentage drop may not totally result from fall in auction sales, but also from increased demand from the rest of the country.
Last word
There are a number of factors that are out of yours and your realtor’s control. If on auction day there aren’t at least two motivated bidders competing against each other, your home will probably go for the reserve price – the minimum you’re willing to accept. The highest bid on auction day will more likely reflect the budget of the unsuccessful bidder, instead of the winner’s maximum buying capacity. You have no idea how much more they were willing to spend and no opportunity to find out.
Talk to your agent about market conditions in your area, and whether selling by auction might be right for you. If there is high demand, short supply, and high levels of interest going through open homes, selling by auction is a great way to get the best possible price for your property.
If you are selling, or thinking of selling your house, then download our handy guide to help you through this journey.
