What should Vendors choose to get the best price?
Is Set Date of Sale Becoming More Common?
The general theme in the current property market in the Eastern Suburbs (including Remuera) is a lack of urgency in buyers, especially for properties that are slightly less desirable for various reasons. Increasingly, I am also seeing more properties going for Set Date of Sale rather than Auctions, especially for brand new homes in the Remuera, St Heliers and Glendowie suburbs.
Feeling confused by Set Date of Sale? I have covered different methods of sale previously.
The focus of this article is to specifically compare these two methods of sale and the considerations underlying the choice of an appropriate method of sale for your property in the current Auckland property market.
Comparison between Auction & Set Date of Sale
Similarities between Auction & Set Date of Sale
Auctions and Set Date of Sale are similar in that both methods of sale have a deadline for a sale. A deadline creates urgency for all buyers and motivates them to act by a certain date or miss out. As such, at any point during the campaign, a buyer can make an offer and you would have the opportunity to consider offers prior to the Auction or Set Sale closing date.
Another similarity is that both methods of sale utilise the technique of “no price marketing”.
Without a specific/set price, the thinking is that more buyers are likely to come through, hoping to be able to buy it. This also ensures that the house is not priced wrongly as buyers would have a better idea of where they see value, especially after they compare all the houses available on the market. The fact that there is no upper limit on price (unlike properties sold with an asking price) also means that a premium price can be achieved with buyers’ competition.
And generating buyers’ competition, in which I have argued previously, is the key to achieving a premium price. However, this makes the pricing search range of a property extremely critical. If the lower search limit is set too high, buyers will likely be turned off and not even show up at the open homes. This is what I have observed in a few unfortunate instances, and it is what you would not want to happen to your property.
Differences between Auction & Set Date of Sale
There are three key differences between the two methods of sale which might sway you to favour one over the other.
Auctions often have a cost because of auctioneer’s fees. This cost varies depending on the real estate agency you select. Of course, having an auctioneer and an auction do not guarantee that buyers will show up or bid.
If you choose a Set Date of Sale, that money spent on an auction can be utilised for marketing your property which may bring more buyers to your house and achieve a good price after some good old competition.
Auctions, by their nature, are publicly conducted and therefore bids made during an auction are transparent – every buyer knows what the other buyer is willing to pay. This transparency creates social proof that the house is worth a certain amount. In a rising market, that pushes prices up as it gives the eventual buyer confidence to pay more since someone else sees the house worth at least a similar amount. There is also comfort that other people desire the same house.
However, in a stable market or for certain properties less popular with the masses, the social proof could work in a reverse way – if the bulk of the market sees the house at a certain value, the one person (outlier) who may have seen the house being worth a lot more is logically unwilling to drastically pay more (for fear of being seen as a fool and overpaying). This is why auctions can often turn up great buys in certain markets and for certain properties.
Set Date of Sale is different as all the offers are confidential and this creates a safe haven for the outlier to pay more than the others are willing to pay due to an absence of knowledge. Set Date of Sale protects the value of your asset and allows the salespersons to extract the maximum out of the buyers.
At the same time, as Set Date of Sale is not held in public, it is especially protective of vendors who are more private and would prefer not to disclose immediately to the public how much their home sells for.
3. TYPE OF OFFERS
Offers for auctions are unconditional, which might suit you better if you want to move quickly to your next stage. This is likely the greatest advantage of auctions in the current climate.
However, Set Date of Sale allows conditional buyers who are likely to pay more in exchange for additional conditions to compete with other offers. The private environment of a Set Date of Sale also gives you, the vendor, an opportunity to review all offers equally with no time pressure.
It also gives you the further opportunity for the salespersons to go back and negotiate with a purchaser so that they can get you the best possible price.
So which method is better?
The final sale price of your property is undoubtedly critical but there may be other factors at play. Depending on the price range of your property as well as the type of property, one method of sale is likely to be more suited to your needs than the other.
Two type of properties that probably should not go for auctions.
In this current market, what I have noticed is that properties of a higher price range (NZ$4 million and upwards) do not seem to perform as well in auctions (obviously there are outliers).
- In the first place, there are not that many buyers who can afford a NZ$4 million house and therefore not many people can or will turn up for auctions.
- Secondly, those who can afford such properties might not be too keen on turning up in public and making offers in public.
- Lastly, some of these buyers have to sell their house first or conduct due diligence – the fact that no conditions are allowed in an auction might make them hesitate to make an offer unless it is a really good deal or they really love the house. In a stable market where the fear of missing out amongst buyers is subsiding, these factors may combine to translate into a poor turnout in an auction. Obviously, prices will be impacted and your property may sit on the market longer if the price at auction is not acceptable to you.
Another type of property that may not be suitable for sale by auction are development sites. I am not referring to just land (for land-bankers) but old and dilapidated houses that sit on big pieces of land. Such properties are less suitable for auctions because the pool of buyers available is drying up.
Developers are few and far between these days because of banks’ tightening up on credit; they also have a plethora of choices given the Unitary Plan changes that allow many plots of land to be subdividable. As such, Set Date of Sale might be more suitable for such properties.
At the end of the day, whether a particular method of sale is suitable for you or not depends on your personal circumstances. You should be open to your real estate salesperson about your timelines, your plans and the house’s condition so that he or she can make the best marketing suggestions to you.
If you are in any doubt or if you just need a second opinion (find out why you absolutely should have a second opinion here), don’t hesitate to give me a ring and our team will drop by happily to offer an honest appraisal and chat with you on how to best achieve your goals.