Have your say: Is an auction the best way to sell your house?
6th Apr 10, 1:47pm
Real estate agency group First National has released a survey for March which it says shows auctions were seen as the least effective way to sell a house. Barfoot and Thompson's CEO Peter Thompson was, however, quoted in the NZHerald as defending auctions as the preferred method to sell. First National’s monthly market survey showed overall buyer enquiry levels were lower in March than February, although listings were up. It said respondents were also asked to rate the effectiveness of selling methods, including auctions, tenders and individual negotiations. Individual negotiation between buyer and seller was deemed by 72% of agents as the most effective, followed by tenders at 18%, First National said. Auctions were considered best in just five locations – Manurewa, Rotorua, Waiheke Island, Tauranga and Timaru, it said. However, First National said its agents in Ashburton, Kaitaia, Otaki, Tauranga and Wanganui reported auctions were working well for mortgagee sales. First National Group general manager John Stewart said vendors needed to make sure they were using the right selling tool in the currently subdued market. “Some realtor groups use auctions as their main selling tool, but vendors must be careful their agent is giving them the best advice for the sale of their property," Stewart said. “We saw a competing agency take 10 properties straight to auction in one town last month and there was not a single bidder," he said. “Mortgagee sale appears to be ideal for auctions and tenders can provide vendors a multi-offer situation, but mainly we are seeing properties get the best price using skillful individual negotiation. At a time when buyers are scarce, we wonder if encouraging vendors to follow the auction pathway first is the best advice. At an auction, buyers must be able to unconditionally purchase." Stewart said the best price may come from someone with a home that had not sold yet rather than a cashed up buyer. Meanwhile Barfoot & Thompson CEO Peter Thompson said auctions were the preferred method, but that the seller meeting the market with a realistic price was more important than the mode of sale.
"Auction makes people make decisions quicker, and it gives more of a timeline for vendors to know how long their properties will be on the market," he was quoted as saying. "We're averaging 80 to 100 auctions every week, and about 35 to 40 per cent are being sold under the hammer." Properties which were not sold on the day of the auction were selling in the weeks after, he said, and that brought the numbers of properties sold by the group to between 70 to 75 per cent. "There are plenty of buyers out there ... there have been many instances in recent weeks where we have been selling properties between $30,000 and $40,000 above the reserve that was set."My view The economist in me says that an auction must surely be the best way to get the maximum price for the seller. A bit of bidding tension seems to force people to pay the most they possibly can. Isn't that good from a sellers' point of view? But from a buyers' point of view I know that auctions are loathed. I've been to a few when buying and very quickly worked out that I had been suckered in by estate agents with expectations of low prices so a 'crowd' was generated. I think they work well in a sellers' market where plenty of buyers can duke it out. But many buyers have long memories. They hate the way auctions are used in the good times, but the shoe is never allowed to get put on the other foot in the tough times. Sellers often seem to pull things off the market whenever reserves aren't met. What's the point of that? It seems like an awful lot of time is wasted in a market like this. As a buyer in a buyers market I'd simply refuse to attend them. I'd submit a (very low bid) for what it's worth and then wait for the buyer to come around. That's why mortgagee sales are so attractive to so many. There is a real prospect of a genuine price being found and some chance that time will not have been wasted. Your view? I welcome your thoughts and insights in the comments below.