Property Auction & Why You Should Run A Mile From Them

So why would I make such a comment like that; IAll the pressure is put on the client to sell.
mean, they're happening everywhere, aren't they?.Let's skip now to the BIG DAY, and ask the question,
They're even on TV."who is under the greatest pressure, you or the agent?
So let's go back a bit. Can you remember back toI THINK IT 'S YOU!
when they were a rare happening. Some big houseHow many will turn up? Will they be 'Tyre Kickers
owned by the local rich family or the farm or antiques;& Sticky Beaks'? I've just spent thousands of
that kind of thing.dollars to get to this point. Boy I hope we sell, and
Now it seems to be just about every three-bedroomMOST IMPORTANTLY, sell at a great price. A price
homeowner is being convinced to sell that way.that will beat the price I could get just selling it normally
So let's look at what or who has driven this upsurge,+ my advertising costs.
and why they would have done it?THE AUCTION
I like to go back to basics and ask the Question; WhoLet's just say that the ideal prices for your home is
Benefits? Because whoever benefits, you can bet$550,000.00, OK!
they're the ones driving the "A" truck, and are trying toIn the crowd there are a number of genuine buyers,
get us all up on the traywhose profile range from:
It's the media barons folks ... the major newspaper and* Investors (who want to steal your property for a low
TV owners have convinced the Real Estate Agentsprice, say $100,000 under)
to push you into auctions, because it generates BIG* Normal home buyers (who will pay a fair price, say
ADVERTISING REVENUE.$520,000.00)
Newspapers don't make money out of the news. The* And finally there is one 'heart' buyer who will pay up
NEWS is only the reason they can sell advertising andto $580,000.00).
it is from advertising that they make a profitOnce the auction starts it is easy to see how the
The Real Estate bosses have fallen for their line hookinvestors get knocked out of the bidding, after all they
line and sinker. Agents have become advertisingare only there to grab a bargain when an auction fails
salespeople for the newspapers.and the seller is desperate. But they do get the ball
So why does the big "A" appeal to the big real estaterolling.
bosses?Next the bidding stops at $520,000.00 where the
1. It brings a sale process to an end with a definite datenormal buyer has reached their limit. They get knocked
... the "A" date.out as soon as the Heart buyer goes another
2. The agent doesn't have to commit to an achievable$5,000.00.
sale price.So your house is now at a bid of $525,000.00 with no
3. The normal sale process is hard work requiring aother bidders to get it up to the possible top bid of
higher skill level.$580,000 which is the capacity of the person who last
4. The client pays all the advertising up front.bid.
5. Advertising makes the Agency look big andThe auctioneer will now halt proceedings and have a
successful, but with Client's Money.private "pressure" chat with you. Now remember you
6. All the pressure is put on the client to sell.do not know the highest bidder can go higher.
7. Failed auctions don't get advertised in the mediaNo matter what words come out of his mouth the
8. They earn commission from the newspapers foressence will be,'the best bid I can get is $525,000.00
selling advertising for them.and no matter what I say I cannot get another bid. So
It brings a sale process to an end with a definite date ...do you want to sell at $525,000.00 or not?'
the "A" date.I did mention pressure earlier on. Are you beginning to
It sells or it doesn't sell! Accordingly it's relatively easyfeel it yet, after all, you have spent thousands of
for the agency boss to estimate his income from adollars, and now you are $25,000.00 under the price
regular flow of auctions.you wanted. If you say NO the audience walks, and
Private Treaty sales require individual inspections andyou are left with a debt, and the hope of selling
negotiations and an end date is not easy to determine.privately after the auction.
The agent doesn't have to commit to an achievableFailed auctions don't get advertised in the media.
sale price.Now comes the next problem. As an auction is such a
At the auction sales presentation, you the owner,PUBLIC event, all the agents and all the neighbors
would like to know 'What Price" you will get for yourknow at what price your auction failed. So I'm sorry
property.but that failed price is now "THE PRICE" AND IT IS
The answer is always,'THE MARKET.' And of course,HARD TO GET PEOPLE TO PAY MUCH MORE
so the story goes, THE MARKET will usually recoverAFTER AUCTION.
the advertising expenses you must pay up front;Ever notice how auctions that fail never seem to be
especially for a beautiful house like yours.newsworthy. Well, you see, it's bad for the organization
The normal sale process is hard work requiring athat has a vested interest in promoting auctions. If you
higher skill level. The agent, therefore, does not have tohappen to own newspapers and a TV network you
give you a possible range, within which your achievablecould always create a program and why not call it
price will fall. By definition this allows the agency toAuction.
employ people with high sell 'the auction' ability butJust like any soapy, before long all the people start to
reduced real estate experience.believe in auctions. They can even see themselves as
The client pays all the advertising up front.being the person on TV. But folks we have to
OH, did I mention that you now have to part with aremember that it is ENTERTAINMENT.
Substantial Cheque of many thousands of dollars inThey earn commission from the newspapers for
order to promote your property. You will be presentedselling advertising for them.
with a well-prepared advertising campaign. Your onlyRemember I told you that the agents who promote
choice will be the 'pink one' or the 'yellow one.'auctions are really working for the newspapers, so
That is the $7,000 one or the vastly superior $11,000naturally they're entitled to be paid? As a matter of
one. If your house is a high price ticket, you can doublefact their employers are so happy that they put on a
these costs.big annual celebration black tie dinner.
Advertising makes the Agency look big andAnd they give out prizes and plaques. So when you
successful, but with Client's Money.go into a big agency's office have a look at the
OK, the campaign is off and running and you firstplaques on the wall. "For the Agency that booked the
advert appears in the Color Pages. Yes it is small, isn'tbiggest Dollar Value Advertising for the Month - Year;
it? As a matter of fact the most dominant FEATUREFor the Agent within the Agency who booked the
on the page is the AGENCY'S NAME. Then, ofbiggest Dollar Value Advertising for the Month - Year
course, we have the sales person's photo,etc.
perpetuating the 'cult of personality.'You bet, every little dedicated worker gets a prize.
Oh yes, then there is the picture of your house and aThey unfortunately don't have a prize for the Agency
few lines of description in typeface you can just read.that rebates the newspaper kick back commission to
'Umm,' you think, 'maybe I should have gone for thethe vendor!
bigger size ad.And so we end the sorry saga of:
Let's move on to the day just before the auction, andAuctions & Why You Should Run a Mile From
when all your money has been spent. The agent andThem?
the auctioneer visit you and tell you that there hasAre You Saying Auctions Should Never Be Used for
been a good response to the advertising. Of course,Selling Property?
you don't have a clue what quantifies as a 'goodNo. I am not saying that at all. If you have a unique
response.'property that has features that may only appeal to a
'We need to establish a Reserve Price" they continue.limited number of people in your immediate market,
As someone once said, 'please explain?'then you should auction.
Oh, it's the minimum price you would accept! 'But.' youThe vast majority of Aussie Home sellers can get a
say, 'I didn't go to auction to get the MINIMUM PRICE, Ibetter and cost effective result from selling by normal
want the MAXIMUM PRICE; what's this minimum pricePrivate Treaty method. Remember it is the Net Result
business?'after all costs that ends up in your pocket.
'Well,' says the auction agent, 'now that we haveAnd I did mention the 'pressure' of the auction process
completed this big campaign for you,' they continue,and the 'public profile' of the failed price does not work
'you want a result don't you, so let's not send thein your favor.
people who turn up get away.' 'No,' you should reply, 'IPS: The correct way to sell your property is by
don't want any result, I want the best price plus myPrivate Treaty with a knowledgeable real estate agent
advertising cost back.' Question! How well do youwith whom you are comfortable and in whom you
sleep that night?have confidence.