“You should sell via auction!” The Mission Bay/Kohimarama/Glendowie/Orakei/St Heliers/Remuera Market Is So Hot Now!
This is a phrase often uttered in the real estate industry by real estate agents and championed by agencies. And I bet you have heard that before.
Sometimes, this statement is correct as popular properties can command a premium price at auctions with the competition from the buyers. This is especially likely to be true when the property market is rising and the ‘fear of missing out’ is prevalent among buyers. Other times (like now), that statement is just not true… The trick is figuring out when that statement applies to you and your particular property.
I’ll be frank with you. As a real estate salesperson laser-focused on my vendor’s interest at all times, I am not someone who supports auctions for all properties.
There are different methods of sale for a reason and some properties are more suited for one method of sale over another. What you are paying me (or your real estate agent) to do is to figure out the best method of sale for your most valuable asset – not take the lazy way out and prescribe sale by auction as the holy grail for all properties.
Real estate agents pushing for auctions to sell houses in Mission Bay / Glendowie / Kohimarama / Orakei / St Heliers / Remuera
It is unfortunate that some real estate agents and agencies heavily promote auctions as the preferred method of sale. Why?
- This is especially likely when the owner/CEO of that real estate agency, as an auctioneer, has a vested interest in having more auctioneering business and earning high fees from auctions.
- Another reason is that auctions often can ‘condition’ you (the vendor) if you had high price expectations and the particular agent had ‘bought’ your listing with a high appraisal. When there is a lack of buyers and a lack of offers, guess what your natural reaction will be? You will likely reduce your price expectations.
Is that in the best interest of you, the vendor? That remains debatable. But the first point looks like a clear conflict of interest at the very least.
I am also well aware of real estate agencies that claim that their auction clearance rates are much higher than the industry norm. Quite often, they do that by being loose with the statistics. How so?
Firstly, as “auction clearance rates” is not a legally defined term, these agencies will define a successful auction campaign to be applicable to any property that sells 21 (or more) days after the auction. Only you can judge whether that’s a true successful auction – would you consider an art piece as having “sold at auction” after the sale was made a week (or two) later privately between the buyer and the seller?
Most people will disagree, and consider a sale by auction as having sold at the fall of the hammer on the auction day itself (or even one day after if the agency is being slightly aggressive because it is arguable that the negotiations (and passions!) during the auction carried over to the next day).
Secondly, the fact that they hold very few auctions as an office can affect the percentage greatly and is not a true reflection of how the market is generally reacting to auctions as a method of sale. It’s likely the case of a few sales distorting the overall numbers.
Ask your agent about auction clearance rates in the Eastern Bays
Therefore, if any real estate agent ever tells you that their office’s auction clearance rate is high, ask them the following questions.
- What is the industry norm in this current market and to explain their definition of auction clearance rates (i.e.whether a property is considered as sold by auction if it fails to sell on the date and time of auction).
- Ask them what percentage of properties in that price range of your home in that particular area (for e.g. Glendowie or Kohimarama) are typically advertised for sale via auction, and the specific auction clearance rates for those properties. Even if they cannot answer on the spot, they should be able to get back to you with those statistics.
That way, you can judge for yourself if auctions are really the way to go in the current market for your property.
Don’t get me wrong. Some houses absolutely should go for auctions – these would be the ones that are popular. Just think about great school zones in the Eastern Bays, double grammar zone or Remuera, areas near Mission Bay/St Heliers beaches or prestigious streets like Riddell Road. Or your house is an architectural masterpiece with nothing to do and priced below $2 million.
Vendor Perceptions and Ray White
2018 Vendor Perceptions of Real Estate Agents Survey conducted by CoreLogic supports my perspective.
While 23% of vendors surveyed said they had chosen to sell by auction, only 12% said they had been shown local auction clearance rates. If sale by auctions is such a good method of sale, one would have thought that such clearance rates will be widely advertised. Unfortunately, this is clearly not the case.
The report concludes that one of the top 8 behaviours that offends vendors is “pushing vendors into sales methods such as auctions that they are uncomfortable with”.
This is really unfortunate, and there is often no need for this. Honesty is the best policy, and I strongly believe that a well-educated vendor can make the right decisions with the right advice from his/her agent.
(Disclaimer: sales pitch ahead)
As a real estate salesperson with Ray White Black Group Realty (one of the top Ray White office across New Zealand and International), our exacting standards demand that we do our best for each of our vendors and act in their interest at all times. Our principal, Heather Walton, is not an auctioneer and this necessarily removes any conflict of interest in pushing (or pushing any of her salespersons) for any particular method of sale.
In turn, this enables us, as salespersons, to carefully consider each method of sale for our vendors, and our recommendations are backed by solid verifiable data (without being ‘loose’ with the definitions).
The consistently high client satisfaction scores and transaction volume are clearly the best testimonies to the level of service and results we provide for the benefit of vendors we are lucky enough to serve.