AUCTIONS - Sellers beware!
Firstly, why do buyers buy at auctions? To get a bargain. Why do owners sell with auctions? To get a higher price than they believe they will get selling traditionally. It just doesn't match up.
Too many times we see auctions being promoted on TV shows as the best method of selling. After all, auctions mean advertising money which means money for the media (including newspapers). You do not need to spend huge promoting costs to obtain the best price. ie. large auction sign, Auctioneer fees, colour ads in the paper. All of theses fees are usually up front. What happens if the auction is a dud and all that money is wasted? What happens if there is a huge storm on auction day. What if there are several auctions in the area at the same time? Many people forget these factors when choosing an auction agent.
To be fair we have seen Auctions achieve above the expected prices but often we have seen selling prices that are well below the expected prices. For some properties that are difficult to appraise an auction may be the best method to get an idea of its probable selling price; but wouldn't a registered valuer be cheaper? And some owners believe you can't win the lottery if you don't have a ticket, so spending many thousands of dollars gives you a chance.
We have asked several owners who sold at auction "are you happy with the result?" Often you would be surprised to know many were very unhappy with the whole process. Many times the price achieved was just over their reserve. It was what they needed and definitely not what they wanted. Why do some agents focus on the bare minimum the owners want, not the top price they hope to achieve. Most buyers who buy at auction admit they would have paid more.
Here is a scenario. You have three bidders at an auction. The first has set their price limit to $630K, the second $645K and the third $675K. The reserve price is $650K. The auction commences and it is not long before the first bidder bows out. The price comes to $650K and the second bidder also bows out. The property is then declared on the market and the third buyer subsequently buys the property for $651K. No one was left to budge the third buyer to his premium price of $675K. That auction not only cost the owner heavy promoting expenses but also $24,000. If he had of placed the property on the market at $685K and followed a clever marketing strategy, then they still would have found that third buyer.
You do not need to go to auction to obtain the best price. A good agent knows the top price buyers will pay and markets it accordingly.