Bad real estate agents, not the property market are the problem

In a falling market, coupled with the spectre of further interest rate rises and easily spooked sellers, you need to dig a bit deeper to understand what is going on.

OPINION

In recent times, there have been numerous articles in the media, and discussions about whether auctions are still an effective method of sale in a changing real estate market.

With falling clearance rates and many scheduled actions being cancelled prior (due to lack of buyer activity), potential vendors are anxious about putting their property up for auction.

Here is the real problem – there are poorly trained agents who don’t know how to implement an effective auction marketing campaign.

These agents are struggling to sell their listings both on auction day and shortly after.

When a market changes like it has now, the auction system actually has a better “success” rate than in a hot market.

Falling auction clearance rates don’t tell the whole story.

Here’s why …

MORE TO REAL ESTATE AUCTIONS THAN CLEARANCE RATES

Firstly, it’s important to define “success” when selling real estate.

As real estate trainer who has been auctioning for over 35 years, clearance rates alone are not indicative of the real success rate. We need to look at what happened before auction day, on auction day, and 14 days after the auction.

Secondly, the data is clear, when the market changes, there are less properties that sell on auction day and before auction day.

However, there are more properties selling within the 2 week period after auction. That is the key piece of data that is often ignored.

When a property sells post auction, this is still considered a successful campaign for two reasons:

1. It can take a few extra days for on-going negotiations to take place and/or for buyers to finalise their financing (these are buyers who expressed interest during the auction campaign).

2. Negotiations with new buyers take place because the property is often seen as a new listing with an adjusted price.

Thirdly, when you compare days on market for auction listings vs. private treaty listings, the data is clear: in a changing market it takes twice as long to sell via private treaty compared to auction.

HOME AUCTIONS ARE VITAL IN A SOFTENING MARKET

Below are four reasons why the auction process is very important in a softening market:

1. There is a deadline with a call to action. This creates urgency.

2. An auction vendor is a serious seller that attracts a serious buyer.

3. It’s an unconditional sale. There is no cooling off period. Preventing buyer’s remorse is crucial in a changing market as buyers can get spooked easy and pull out of sale at the final moments.

Leading agent Michael Kollosche is interviewed by Tom Panos at AREC 2022 in May.

4. Multiple buyers can nudge the price up by 5 per cent or 10 per cent more compared to private treaty.

Of course, there are many other factors what will influence the method of sale you use.

In a post-COVID market, many vendors are choosing the hybrid-auction method (online and offline). Companies such as Realtair offer this ‘timed auction’ solution to create transparency and increase bidding.

Your local agent is the best person to advise what method of sale would work best for you.

Remember, clearance rates are not the only thing that determines the success of an auction.