With the current shortage of houses for sale in Auckland and house-hunters lining up to grab what's there, selling by auction is proving to be the winning method of marketing, say the experts. Report by VICKI HOLDER.
Traditionally, the real estate market cools off in mid-winter as people batten down the hatches and hibernate.
Yet, Auckland's market is experiencing a wave like never before. With a shortage of houses for sale, buyers are lining up, cash in hand.
Some say, in such a heated market, there's no need to auction your property, thus avoiding the expense of the marketing campaign. But most agents have figures to prove auctions are still achieving better results than selling a property with a price alone.
The reason, says Mark Sumich of Cahill Real Estate in Sandringham, is that auctions give the chance for more than one buyer to push the price as far as someone is prepared to go. You just don't know how much a home will sell for anymore. Most simply don't relate to their Capital Valuation (CV).
Mark's company concentrates on the booming segment of city-fringe property in the $350,000 to $500,000 bracket. But as an independent auctioneer, he gains a good feel for the general Auckland market. Right now he's seeing many auction buyers going beyond what they thought they were prepared to bid, simply because they're tired of hunting.
Mark believes the auction process is always a good way of selling property. "But when the market is as heated as it is now, one of the reasons buyers act so strongly is that they're sick of looking. They're trying to get themselves out of the buying market. Right now, it's almost criminal of vendors not to give all the buyers a chance through auction."
Take the Waterview property he sold on the weekend. The owner paid $266,000 for it three years ago and its CV was $295,000. He subdivided it into two lots. The site with a house sold for $405,000 and the piece of bare land for $215,000, a total of $620,000. "The buyers were just lining up," says Mark.
The thing that makes the auction process so good is its transparency, he says. "Buyers don't actually know what they will pay for a property. They know what they would like to pay and what they can afford. But they're waiting for a reason to justify paying more and the only way that can happen is through the transparency of an auction. If a top price is going to be achieved, the only way you'll do it without upsetting anybody is by auction."
Kay Niepold, temporary manager for Glover First National Real Estate in Green Bay, is one agent who doesn't see the point of holding a property until auction when you can still achieve really good prices in those first few days. "To bring a property onto the market and say you can't buy it until auction seems counterproductive. The auction could be three weeks after they see it. If buyers see something in the meantime, there's such a shortage that they'll grab it." Niepold adds there's a lot of pressure on buyers at the moment and an auction only puts them under more pressure.
Working in the same area as Glovers, Bayleys in Titirangi has set a new sales record almost every month this year with both auction and exclusive properties. Manager Gitti Harre has produced graphs showing the sales percentage achieved for 34 properties sold above CV, comparing the results for 17 sold by auction with 17 sold as exclusive listings with a price for a period up to July 2003. The average percentage above CV for auctions was 50.44 percent, while for exclusives it was up 40.3 percent.
Many of the auctions achieved exceptional results, including a two-bedroom home in Huia Rd, Titirangi, which sold for $391,000 at 95 percent above the CV of $206,000. Another home, a converted scout hall at 19 Paturoa Rd, sold 71 per cent above its CV for $540,000.
Geraldine Meo, manager of Harcourts, Remuera, has put together statistics that make a good case for continuing through to auction day rather than selling prior as offers come in.
She says this year properties that sold prior to the auction achieved 20.24 percent above their CV, while those that went through to auction day were, on average, 27.38 percent above the CV. Properties sold by auction were on the market for a much shorter period. From the day they were listed they lasted 29 days on average, while exclusive listings hung about for 53 days.
Nearly every agent in Auckland can tell you a great auction story they've been involved with in the last few months. Steve Koerber, of Barfoot & Thompson, Remuera, recently listed a 1,120sq m property at 12 Ascot Ave, Remuera, for a couple who had bought it in 1992 for $300,000. They had no idea what it was worth today. During the auction campaign offers came in and Steve advised the owners to turn down $700,000. On auction day, the price crept up and finally sold at $940,000. The owners felt like they'd won Lotto, achieving around $250,000 more than they were prepared to accept.
Mary-Jane Cull, of Ray White, Avondale, tells of a mortgagee auction of a three-bedroom, waterfront property in Fairlands Ave, Waterview, with a CV of $295,000. "It was a small home and the owner had taken out the kitchen. There was a hole where there used to be a Para pool with weeds growing through the decking. An offer came in for $320,000 prior to auction. I advised the bank not to take it. I had a viewing and about 30 groups of people came through. The auction room was full of investors and one private buyer. After the reserve was set at $320,000, it sold under the hammer for $420,000, well worth the price of the auction campaign!"
The perversity of the current situation is that many homeowners don't want to put their properties on the market right now. They might find that as summer approaches prices will ease back when listings are more prolific.
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