Why would you sell a property prior to auction?
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Oct 4, 2019
Why would you sell a property prior to auction?
Having gone through an auction campaign, why would a vendor opt to sell before the big day?
In my experience, there are a number of reasons why a seller might consider accepting an offer before auction – as well as why they shouldn’t.
Selling before auction
It’s never a good idea to sell in the first week of a campaign – regardless of the offer on the table.
That’s because it takes a number of weeks to ascertain where the market is for your property.
In the first week, you also don’t know whether that buyer is the best buyer out there because there hasn’t been enough time in the campaign to create healthy competition.
Selling prior to auction usually happens when there is only one buyer, or one buyer who has established themselves as superior to the rest of the competition.
There are generally two types of offers before auction.
One is someone who makes a cheeky offer that is well below their maximum price to see if the owner will bite.
The other, which is less common, is a buyer who makes a strong offer before auction, under the proviso that they will walk away if the vendor doesn’t accept it.
Generally, though, they don’t throw their toys out of the cot and turn up on auction day to compete for the property anyway.
Selling prior to auction can also be an indication of a market on the move or one on the decline.
What I mean by that is during a market upswing, more buyers attempt to purchase a property prior to auction because they know there will be strong competition for it on the day.
When a market is strengthening, buyers are the first ones to experience it because they miss out on other properties, hence why the number of offers before auction increases.
On the other hand, when a market is experiencing softer conditions, then more sellers are prepared to accept offers before auction because they believe that is their best chance of securing a sale.
When sold prior numbers spike, it doesn’t usually last long but it’s often an indication of market change.
Selling at auction
In Queensland, for example, only about six to 10 per cent of properties are sold prior to auction, which is an indication that most sellers are prepared to go to auction.
That’s because the auction campaign has created competition, which is likely to drive the price higher under the hammer.
A recent example is a property in Burleigh Heads where I was the auctioneer.
The home had been in the same family for 57 years and was perched on top of the most eastern point on the headland on an 810-square-metre block with spectacular views.
Clearly, this was a unique property to hit the market, which automatically created a lot of interest.
A number of buyers made offers prior to auction, but it was never in the seller’s best interest to accept any of them because there was such strong competition for the property.
Because it was a family estate, selling under auction conditions was also the most transparent option for them.
The property sold under the hammer for $5.35 million, which was significantly above the reserve and higher than any of the offers made prior to the auction.
Of course, my advice is always to sell at auction – however, auctioneers get paid regardless of whether it is sold prior or under auction conditions.
In most cases, though, your best bet is to move forward with the auction.
That's because it does establish the market price and you do give yourself the best chance of achieving a higher sales price from a number of bidders competing for your property.
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