After this weekend’s “Super Saturday” the REIV have reported on 1053 auctions. 690 sold before, during or immediately after auction. This gives us a very healthy 66% clearance rate. The last time there were over 1000 auctions reported was the same weekend in October in 2010. From 1031 auctions there was a clearance rate of 68%. Much more importantly, however, is the fact there were also 512 private sales. This means we have had two weeks in a row where total reported sales of properties have exceeded the 1000 properties.
99 properties sold before auction. This is the other statistic that most people fail to realise the monumental significance of. Some selling agents need to take their clients to auction. More often than not this is because the selling agent has promised a number that far exceeds what they have any hope of attaining in the market place. It is known in Real Estate Agent jargon as “buying the listing”. It is the single most significant reason we see massive underquoting in the market place today. An agent will tell Mr & Mrs Seller that they can achieve $1.8M for their property. The agent knows full well that it would need a totally uneducated purchaser that has absolutely no clue what they are doing to walk in and pay whatever is asked: commonly referred to as a “wood duck”
The idea of buying the listing means they get the “listing authority” from the vendor, do not quote a price on the property then hope they can convince the vendor during an expensive advertising campaign to drop their price to something reasonable, $1.5M or there about. The thought behind this is that at least they get a shot at selling and if they convince the vendor about the true price of their property then they can still earn a commission.
Getting back to why 99 properties sold before auction is significant. It means that selling agents are becoming more realistic with their vendors. A vendor that has been convinced by an agent that his property is worth 20% more than what it will sell for is not likely to accept an offer that is well below expectation before seeing themselves fail at the actual auction. With the increase in “sold before auction” it means the selling agents are becoming more reasonable with their listing presentations.
There are notable exceptions to this. There are still too many agencies having reserves in excess of 20% over the top of their quoted ranges. However, there is another school of thought that believes reserves should be published prior to the start of the campaign. This seems to get a very good run in media circles and for some unknown reason it is seen as reasonable to put a reserve at the beginning of the campaign, that the agent still will not sell for, and then run an auction that the final price ends up nearly 10% above the reserve. If a property is to be sold for a quoted price that is fine, but when an out of area agent quotes a reserve about 10% below what the property is going to sell for, runs to auction and gets fair market price (about 10% above what he quoted) and then tells everyone his system is better than everyone else’s!! Please! He was either naive, and didn’t know what the property he was selling was worth, or he decided that underquoting gets more people to an auction than quoting accurately. By the way, this is not hindsight; The day the property was placed on the market we attempted to purchase the property and were told in no uncertain terms that it would be sold at auction. We immediately told our clients not to bother with pest and building inspections as they did not have enough to purchase the property.
If you are one of the many prospective purchasers flooding back into the market place, you will need to do a lot more homework regarding property values. More and more properties will not make it to the auction day. Traditionally as we get closer to Christmas and as vendors become more astute with the values of properties, many agents will look to negotiate properties before auction.
For those prospective buyers, there are many buying agents that can assist you with negotiation only, assessment and negotiation or alternatively you can get a full service search assess and negotiate. Always look for a fully licensed real estate agent, that is a member of the REIV and has had at least five years of buying and selling experience.
Ian James
Director
JPP Buyer Advocates
