Auction! Use it to your advantage.

A property and especially one that is your primary place of residence is one of a few opportunities a person will have in their lives to make a tax free capital gain, so it’s in their best interest to make as much profit as possible.

The average days on market for a property sold by auction are lower than any other method, in many cases the prices are equivalent or greater, and any purchase under auction conditions must be done so on a cash unconditional basis. This equates to the potential of more money, less time holding the property therefore less interest payable and the potential of a cleaner contract.

To properly explain my theory I will need to cover off on a few areas and the thoughts of how they relate to this matter;

The first one of these is VALUE. The traditional way that a seller, professional valuer or Real Estate Agent will VALUE or APPRAISE a property is via comparing this with similar properties that have sold in the same geographical areas. For example the idea goes that something on the same land size with the same amount of rooms and a similar level of finish in the same suburb should sell for the same price as others, right? So people the appraiser will generally look at those past results and determine the price based on this data.
I see a couple of problems with this methodology. 1 being that if a property always sold for what the last one did, the market would never move, meaning ‘the market’ is not being considered.
2. The market (the buyers). I believe that the true market value of a property cannot be determined until the property is on the market.

The reason behind this is simple. Every buyer is different in every single case and each will have a different idea of value. Some people may place a higher emotional value on a property. For example. Some may be sick of looking and willing to pay more than a person who’s just commenced their search, some may be investors with no emotional attachment versus someone desperate to get into a particular area because of the school zoning. The emotional value for every type of buyer is different.

Next is the, WHAT IF? Nearly all of us have heard of or seen a property sell for much more than we assumed it would. It happens all the time. A property that you thought was worth $800,000 went for $900,000 or a property smaller than yours sold for a higher price than you achieved. The fact is it happens all the time. So I would put it to any seller or owner that a high price is POSSIBLE with any property. As a seller wouldn’t you at least want to entertain the idea of a high price? Entertain the possibility of what could occur? Of course you would.

Auction allows you to entertain the possibility of  a high price, while during the campaign you can generate valuable feedback from the people who are eventually going to determine the sale price…. The buyers. This feedback then allows the market to determine the approximate price as opposed to past data, therefore allowing the owner to position the reserve accordingly.

If the seller sets the reserve at where the market feedback sits that then becomes their benchmark. If the benchmark price is achieved a seller has a result that is no different to that which they would have if putting a price on. On the other hand if there is competition and buyers get emotional, the seller has the opportunity for a great price. I have seen this many times before where an extra $1000, $2000 or even $100,000 is achieved.

Not all markets are receptive to auction so this will need to be considered when selecting a selling method. if you do choose to head down the auction path ensure that your agent has a sound strategy (as they all differ) round leveraging the process to get you the best possible price.

DR

If you would like more information on selling a property by auction or have a question for Daniel, please fill out your details below and we’ll get back to you right away.

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