On TV, auctions look simple. A fast-talking auctioneer stands in front of a property and takes bids from eager would-be buyers, before the hammer drops and it’s sold amid a flurry of waving hands and pointed fingers.
In the real world though, it’s more complicated. And it’s in the best interest of all sellers to understand the popular sale method, from marketing to reserve prices and everything else in between.
Industry expert, WBP Group executive chairman Greville Pabst, explains the auction process and what sellers need to know.
A lot of the hard work of selling a home goes into planning the strategy. Here’s what will occur before the auction
“The agent will run a marketing campaign, usually for four to five weeks, before the auction date,” Pabst says. This involves advertising and showing the property, liaising with potential buyers and providing contracts.
Then, the day before the auction, the agent and vendor talk numbers. “This is a conversation around expectations on price. The feedback received during the campaign will be an important part of this,” he says.
The reserve price – the figure at which the auction becomes “live” – is also be agreed, as well as any potential vendor bids; a device used to encourage bidding.
“The agent will run through the process for the auction day too, so the seller is fully informed,” Pabst says. An auction can either be held onsite at the property or in another location, like a boardroom.
There are strict rules about how auctions are run and rules differ from state to state, Pabst explains.
Usually, the home will have its final Open For Inspection immediately before the auction.
At least 30 minutes before the auction commences, the agent is required to display certain documentation about the property and verbally provide set information to potential buyers.
In Victoria, for example, the auctioneer must tell bidders:
In most states, potential buyers must register before the auction starts to get a bidder’s number.
It’s now time for the action to begin. The auctioneer will invite an opening bid to start the auction and then accept subsequent bids.
Pabst says the auctioneer can “set the tone for increments”, but bidders are able to seek other amounts. A vendor’s bid can be used to encourage bidding from buyers, he adds.
Dummy bidding – false bidding made by a non-genuine buyer – is against the law, Pabst says.
Once the reserve price has been reached, the property is considered to be “on the market” and is sold to the highest bidder.
A 10% deposit is normally paid, with the rest due on settlement.
Pabst says if the bidding doesn’t reach the reserve, the property is passed in. The highest bidder is usually given a chance to negotiate with the seller, but this is not law. “Let the agent work for the money,” he says.
“Who says it has to sell under the hammer? It could be a rainy day, the main buyer might have fallen sick and stayed away. It’s an urban myth that you’ll get less for a passed in property. It’s possible to run another auction on another day and get a great result.”
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