The truth about real estate auctions

The auction is just a process not a miracle worker, but it's a process that really works.

There's been recent media attention around real estate auctions, which doesn't give all the information about the auction process. The way these stories were conveyed may cause those considering auction, to understandably question or dismiss the auction option.

The articles only reported part of the facts. What they didn't highlight is that it's only natural that as market volumes move up and down so do the volume of auctions. Fewer homes sold, will mean fewer auctions. The articles also only report the results of a handful of companies and implied that the Auckland and BOP markets showed similar auction results. They also failed to take into account the number of properties that have received bids at auction or post auction offers.

The articles also excluded the number of properties sold post auction, to buyers who weren't in a position to bid on auction day. The reality is that these transactions are as important and as much of part of the auction process as those sold on auction day.

The auction process is simply a three-phased approach. Designed to give sellers the best chance to achieve the price they want and as many buyers as possible the chance to buy the home they want:

- Phase one identifies all potential buyers.
- Phase two allows the seller to work with those able to bid on auction day.
- Phase three allows those not able to bid to enter into negotiations with the owner on a conditional or unconditional basis should the property be still available.

The recent articles also go on to say that clearance rates have dropped in the last two years. This is certainly not the case in all real estate businesses.

Simon Anderson, chief executive of Realty Group which operates Eves and Bayley says, "our year on year statistics for the Tauranga Mt/Papamoa area show over 85% of properties taken to auction result in vendors being presented the opportunity to sell.

Even more importantly, over 80% of auctions result in a successful sale at various stages of the process. Even more impressive is that we maintain an average success rate of over 45% under the hammer."

These stats are certainly not indicative of reducing the success of selling by auction!

In reality there are only three reasons a property will not sell at auction:

1.The buyer is not in a position to buy at auction on an unconditional basis
2.The buyer for the property is not in the market during phase one of the auction campaign
3.The buyer and owners are not sharing the same opinion on price

So, if you're considering selling soon, remember the auction is just a process not a miracle worker, but it's a process that really works. A good real estate sales person will present you all the options and offer advice on the method of sale that's most likely to get you the result you want.

If you'd like help with making a decision on which method of sale you'd like to use, please get in touch with the EVES and Bayleys teams via selling@realtygroup.co.nz.