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Is Auction the Best Method of Sale in Today's Risk-Averse Financial Climate?

Sep 29, 2023

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The market is still moving along nicely due to low supply that is outweighing demand. However, in the midst of a financial climate where banks are playing it safe, the choice of selling a property becomes a pivotal decision for both sellers and real estate agents - in terms of achieving the best result. Traditional sale methods may generally not be as appealing, but agents still seem to be pushing auctions without considering if there is a better way. Then there is the other question, which was pointed out recently by a great real estate coach and auctioneer, Tom Panos: Is the agent good enough to be running the auction?

Most agents will tell you auctions offer a unique advantage in uncertain financial times and that they create an atmosphere of urgency and competition, compelling potential buyers to act quickly. This approach works well if you're happy to sell at any price and just want the certainty of selling to a cash buyer and moving the risk of last-minute financing issues onto their shoulders, not the sellers.

However, what is worth more to you? Certainty or say, $200,000 more? We recently listed a property for sale at auction against our recommendation; it passed in, and we ended up selling it for more after the auction. The seller was happy with the result but later said to me, "We should have just listened to you in the first place and would have sold in half the time."

This seller was misled by other agents quoting grossly inflated clearance rates. They ended up going with our agency because they considering us better negotiators, more honest and less driven by self-promotion, but what prompted them to want to auction was many other agencies including sales before the auction or sold after the auction in the clearance rate they were quoting, giving the customer the perception that the success of the auction is high. When a seller and their agent sell a property before the auction it's usually because they've found the best buyer who is willing to pay more than anyone else, and they sell after the auction because sometimes it takes a little while to find the best buyer - that's the reality.

Unfortunately though, sometimes the agent is pushing auction because they want to be paid in 30 days from when the property is sold or because it's an easy way to buy the listing (tell the seller what they want to hear) and deal with that seller's grossly inflated price expectations over the next four weeks without losing the listing to a more honest and transparent agent. Either of these two tactics, in my opinion, are morally and ethically wrong. Any seller that is witnessing an agent spruiking big auction events to as a means to get the best result should ask them, "How many did your agency have listed at the last event, and how many of those sold under the hammer at the event, not before and not after it?"

In conclusion, while auctions aren't yielding the same results they were twelve months ago, they still offer security for a seller who isn't completely driven by achieving the best price. Agents should, however, consider a bit of creativity in their negotiations and not focus on the "one size fits all" approach. Additionally, they should always be focused on achieving the best result and telling the truth, even if it's not what the client wants to hear. (Note/Tip: This would vastly increase the public's perception of real estate agents.)

If you want some honest advice about achieving the best result for your home, give our office a call today - we'd love to help!

Have a good weekend.

Cheers, Henry