One of the biggest trends in recent times, often pushed hardest by large Real Estate agencies, is to take properties to auction in Brisbane. The unfortunate reality of this process is, the auction format just doesn’t perform to the expectations of vendors. Our analysis over the last 6 months of 2017, can conclude that approximately 60% of properties do not sell at auction in Brisbane. Understandably, vendors are left disappointed that they’ve not only spent more money committing to the auction process, but effectively have nothing to show after a multi week marketing campaign.
In the December quarter of 2017, Corelogic recently reported that the Brisbane auction clearance rate for the period was only 46.7%. Given that the December quarter is traditionally one of the most buoyant periods for property, as buyers frenzy to purchase a new home ready for Christmas, it is surprising that the auction clearance rate remains stubbornly low.
Why do some agencies push the auction process hard?
Many big brand agents will push hard for you to auction your property, unfortunately some of the time they are pushing you to do it because it’s in their best interest to sell your property via auction.
No. 1 – Shorter campaign period marketing effort by agents
A typical marketing campaign prior to auction usually lasts between 3 and 5 weeks and provides agents with a deadline as to when they should expect to sell the property by. Usually, the greatest marketing efforts are devoted to this short window prior to auction, with less attention afforded to the listing after the big day. This is why properties that previously went unsold at auction can often stay on the market for many many weeks before selling for less than originally hoped.
No. 2 – Pressure is put on the seller to meet market:
Following on from the previous point, auctions can often result in rigorous on the spot negotiations with large financial decisions having to be made under pressure for both buyers and sellers. Even if the property passes in on the day, the selling agent still might suggest the seller meet the market and engage in post auction negotiations with the highest bidder in order to close the sale. With all the emotion involved in selling a home, it is unlikely most people would be able to make a rational and informed decision, in the heat of the auction moment.
No. 3 – Cash Unconditional Sales:
When a property is sold at auction, there is no chance of the contract falling over meaning the sale should be clean and quick. The agent is guaranteed their commission upon settlement. If there are a few building or pest issues, there is no building and pest inspection clause.
No. 4 – A more expensive marketing campaign = higher exposure for the agent
Vendors usually must shell out around $1000 in additional fees to run the auction format, typically to cover their costs and remunerate the auctioneer. Agents might also suggest a higher marketing budget for large glossy ads online and in print media to create hype prior to the big day. These forms of advertising serve a purpose, but they are expensive and in many ways, are a form of free advertising for the agent and their brand rather than your property. The process can also be more expensive for buyers who prior to bidding, would have undertaken building and pest inspections regardless of whether they even place the highest bid on auction day!
When is it ineffective to auction a property?
- If the property is in a low demand area
- If the average days on market in the area is high, ie. above the typical 4 week auction campaign
- If there’s lots of stock on the market to compete with
- If you have a strict budget for your marketing campaign
- If the property is most suited as a development site, as developers prefer not to buy at auction
When is it beneficial to auction a property?
- If you have time constraints and need to sell quickly
- If you have a unique property with a value hard to determine
- If you have a property in a high-demand area with lots of active buyers
- If there’s a shortage of stock on the market
- If average days on market in the area is low ie 4 weeks or below, people are buying into the suburb fast and will compete fiercely at auction
- If you have a high budget for your marketing campaign
Auction has proven most effective in the Sydney and Melbourne markets, where up until more recently, there has been a frenzy surrounding residential transactions for fear of missing out. It is this key market sentiment that Brisbane lacks which creates the high clearance rates of our southern counterparts. Once the hype experienced in Sydney and Melbourne travels further north, and demand picks up markedly, auction will become an unbeatable format for selling property in Brisbane.
If you’d like to speak to a sales team that is honest and upfront, and who will run a sales campaign tailored to your specific needs and circumstances, please get in contact with residential sales director Anthony Oddo on 0430 028 254 or Brad Weston on 0448 761 781.