Should You Auction Your House?
This is Rob Levy from Remax Excellence in Townsville and I'm here with Paul Gaffney, who is the 2016 Remax Auctioneer of the Year, and we're gonna be talkin' a little bit about auction today.
Well, obviously people know two ways of selling a house. Inside the private treaty or the auction scenario. An auction is a good way of allowing the marketplace to tell you where your property is located in the market. Everyone always comes up with the question what's my home worth? Any real estate agent can tell you a number, but at the end of the day it's the market that'll tell you what it's really worth. And the best way to do that is through auction.
Okay, so some agents say that you should auction everything. I don't know about that. Are there some houses that are better for auction than others?
Look, all auctioneers are different as well. Some auctioneers do say that... and do say that you should auction every single house. I'm sort of a little bit open in that, again going back to finding out the value, if you're selling a three bedroom, one bathroom home and there's 10 of them in the street, you have a rough idea of what it's worth. So you could probably sell it by for private treaty. But definitely with a something a little bit unique, maybe extra bedrooms or pool or a lift or a heli-pad, then, you know, you put it out to the market and you might get that crazy money.
Cause if there's a guy with a helicopter and there's only one house with a heli-pad, you just don't know what someone will pay.
Well, demand is obviously greater than supply.
Okay, so in Queensland, a lot of people say that auctions don't work because we've got a 50% clearance rate here, while down in Sydney and Melbourne the clearance rate is up to 90%. So if you've only go a 50% chance of selling, why would you auction?
Well those figures are correct, but again, what the auction does is, is tell you where you're at. So the outcome of an auction is not just to sell your home. The outcome of an auction is to find out where you are. So if after a four-way campaign and doing the auction you don't sell, it's not the end of the world. You can then go on the market at the price where people have said that it's worth. 20% of auctions sell prior to auction, then afterwards, another 20% will sell post auction. So if you add that to the 50% we already sell, you're gonna get probably just as good of a result.
That's fantastic, so auction is like three bites of the cherry.
You might be able to sell it to someone beforehand, who wants to pay a fantastic price, it's not even worth going to the auction.
You might sell it under the hammer and if not, you pretty much know where that house is gonna sit... and you can put a price on it and it will go. Right away.
If during your four week campaign you've had four open homes, you've had 50 to 100 groups through, you get the feedback from all those people that, they think, they know where the, in their opinion, where the property is sitting. That's where you start to market it.
Okay so here's the number one question we get asked at auction, can you tell me about what the vendor wants for this property? Are you allowed to give people a price guide? Okay so the simple, quick answer is legally, no.
But then, there's ways to give them an idea. So again, going back to the main reason we do auction is because we don't want to give our price guide.
We don't wanna influence the market. One agent might say the house is worth $800,000. Another agent will say that's worth a million. Those agents are just basically on their individual opinion. When you have a hundred groups come through, you get a much better idea of what it's worth. So rather than influencing people with your, your guess, you let the market tell you where it is. But, if you do want to get around the legalities of not being able to get a price guide, you can always give comparisons. So on the back of operations, we always have six recent sales in the area, similar sized property, similar size makeup of rooms and bathrooms, and that gives people a ballpark.
So it's not just that we agents don't want to give you a price. It's more around the fact that the Queensland government doesn't want us to be in, you know, unfairly influencing the market. Like if I told the buyers the house was worth probably around $950,000 but all the buyers really thought is was worth $850,000, and someone bought it for $950 and then it didn't value up, we could be liable. Correct. People have been sued for that.
That's what it's about. It's not just that we're jerks and don't wanna give out a price. Correct, and it's the hard thing to say because it's the number one question, you're right, "What is it worth?" It drives us crazy.
We would like to help but we it's probably better if we don't. So, if a buyer's gonna come to an auction on a Saturday, at the property, what do they need to bring with them.
Okay, to buy at auction all you simply need to do is turn up with your identification. So a simple driver's licence and you sign-in, you get your paddle.
It's a simple as that.
But, auction buying is different from normal buying. You don't get a building inspection, is that how it works? So obviously you turn up on the day, but hopefully you've done a lot of work before then, so you don't just want someone who's driving past, see that you're conducting an auction, pull over and whip out their licence.
But we also encourage people to do their due diligence. So people say, aw I don't have the opportunity to do a building and pest because when you buy under auction conditions, there's not building and pest clauses, no finance clauses, you're buying as is, hammer price. But there's nothing to stop people getting one done pre-auction. So you list your auction, it's still four weeks until auction day.
Plenty of people get their own independent building and pest report done. And that's a very smart thing to do. You obviously get your finance sorted because again, that's your buy under auction conditions, no finance clause, so if you bid a million dollars and the hammer falls you're libel and if you don't, if you don't front up with them money, you can be sued. So yes it's as simple as turning up with your licence, but do the work beforehand.
Absolutely, and with my sellers, I always encourage them to get a licenced building inspector to building inspect their house beforehand, that way we can hand it to the buyers and go hey, rest assured this is an independent licenced inspector,
He's checked out the house. You don't even have to do your own building inspection. You can if you want but here's what's going on with it so you know what you're bidding on.
Yes the very good agents do encourage their owners to get a building and pesh report. So that you that old adage being forearmed is being forewarned. Rather than people haggling you down on price because they notice things that are faulty. If you know that in advance, you can defend the price that you've set or that you're after.
Fantastic, so as far as I can think of, those are the basic questions that buyers ask us about auctions. However, if you have more questions about auctions or really about any real estate topic, feel free to drop a comment below or contact us on the details provided here on the website.