When selling your property, there are quite a few different modes of sale you can opt for. When it comes to the choice of selling your home through the auction process, the choice will be largely dependent on the type of property you have.
Higher end and luxury properties are often sold through auction due to the nature of New Zealand auctions focusing on the quality of the property, with price being the secondary concern. In this environment, keen bidders can drive the price of the property above market expectations in some cases, with no pressure to sell if the property fetches a lower than expected bid.
Another benefit to selling at auction, is that you will attract genuinely interested buyers. In New Zealand, those bidding at auction must do their due diligence before bidding. This means the contract of sale is not subject to inspections or finance – as these must be organised before auction day and ensures only serious buyers will show up to bid. Once you’ve decided on auction for your property, how can you ensure you’re best prepared for the day? To help you, we’ve gathered a list of considerations and frequently asked questions from Harcourts top auctioneers.
Before the auction
Auctioning your property is about so much more than simply showing up on auction day. There’s a lot that goes into it before-hand to ensure you achieve the best result possible for your property. Marketing your property well is chief among the things you’ll need to do.
Your agent should walk you through your marketing plan in detail, from the images that’ll be selected and advertised, the copy that will be included, to where the property will be advertised (online, papers, brochures, in office).
Before you go to auction, you should expect to hear from your agent on a daily basis and a face-to-face meeting around once a week. Ideally, you’d receive a written report which summarises all of these activities as well as the interest in your property. Your agent should also be keeping you well-informed of the market, so that you can make the best decision come auction day.
What is your role on the day?
If you’re in the country, the best recommendation is to attend your auction. It’s great to have you there if there are any last minute questions. Some common ones buyers ask are: “Can we vary the deposit amount?” or “Can we vary the settlement date?”
Your auctioneer will also want to confer with you depending on how the auction is going. If bidding stops below your reserve price for example, your auctioneer will want to discuss next steps with you.
Getting to know your property
The auctioneer should be introduced to your property, much as your agent has been. They should walk through the property, understand the features of the home, and really understand why a buyer would fall in love with it. That way they’ll be able to better represent your home to buyers.
Your auctioneer will also want to know all about the interest the property has received. They’ll ask your real estate agent detailed questions about it. How many inspections have there been? What kind of interest has the home received? Have any valuations been done? Any building/pest inspections? Does the buildings age suggest a dampness or infra red test for water damage be conducted? Is the property fibre ready?
When it comes to marketing your property before auction, the rule seems to be more is more. The success of your auction can be largely dependent on your marketing campaign.
The latest research from Harcourts, showed a direct correlation between the amount spent on marketing versus how much interest was generated for a property, and what price it sold for.
Our Harcourts Promise and written marketing plans ensure a smooth marketing campaign and that you recieve feedback on what prices buyers are indicating they are willing to pay for your property.
The reserve price
It’s important for you to understand and be clear on what your reserve price is, and how it’s used during the auction. Your auctioneer should be able to explain this to you in detail. You will need to discuss your reserve price with your auctioneer. They should be working to ensure you get the best price possible for your property.
That being said, try to avoid openly discussing price with others, to reduce the risk of price leaking out into the market. The auction should focus on the product (your home), and price should become secondary. Harcourts CEO, Chris Kennedy believes there are three types of figures to consider before the day:
Your happy price – The figure you'd be very happy to accept.
Your ok price – The figure you'd be ok with based on the feedback you've received, you don't see a win but you don't see a loss.
Your grumpy price - This last figure is basically the one you wouldn't be thrilled with, but given market conditions, you're prepared to unhappily sell at that price.
Remember, at all times during an auction, you’re in control. If a bid is high enough take it. If not, don’t. But the reason for not taking the offer needs to be greater than the reason the home is on the market in the first place.
Chris Kennedy our CEO discusses the auction process in New Zealand in the following clip.
Frequently Asked Questions
What if no one registers for/turns up to the auction? Harcourts Auctioneer, Andrew North says, in reality, this isn't something that happens very often. Both you and your agent will know well before auction day how much attention your property has received and how much interest there is, giving you a good indication of how many bidders are likely to show on the day.
What if nobody bids? It’s understandable that buyers might be nervous during the excitement and pressure of an auction. This is why it’s not uncommon for an auctioneer to be met with silence when asking for an opening bid. Most people are waiting to see what others at the auction might bid. In the event that no one calls out an opening bid, the auctioneer will nominate a starting bid to get the ball rolling.
What if the reserve price is not reached? In this event, your auctioneer can pause the auction and come and speak to you, the seller. They will go back to the current highest bidder, and ask if they’re prepared to increase their offer to a price at which you’re prepared to sell. If the bidder is not prepared to do that, your auctioneer will then see if you’re prepared to lower your reserve price. That’s why it’s important for you to have a price in mind that whilst you wouldn’t be entirely happy with, you are prepared to sell at. If neither of these scenarios happen, then a sale cannot occur, and your home will be what is called ‘passed in’.
What happens when the property sells? After the sale, it’s time to focus on the buyer. Your auctioneer should take them aside to start looking at the paperwork and get the contract signed straight-away. It’s also time to look at how the deposit is going to be paid. As the current owner, you’ll then sign the paperwork, and the sale has concluded.
Buying at an Auction
What the benefits of buying via auction?
If you’re buying:
An auction means you know exactly who your competition is on the day.
All buyers are given fair opportunity to buy
You know you are dealing with sellers who want to sell on the day.
At the fall of the hammer, the auction is final and your successful bid means the property is yours with no further negotiations, and the contract is signed then and there.
What you need to do to prepare before auction:
Have your finances organised by auction date. Know exactly what you can afford to bid. If you’re successful on the day you’ll be asked to sign the sales agreement and pay a deposit. This is normally 10% of the purchase price.
It’s also a good idea to have your other affairs sorted by this date, such as the sale of your existing property, organising a check of the property you’re bidding on and familiarising yourself with auction documents.
Have your solicitor inspect the property title and all legal matters related to the prospective purchase.
Talk to your Harcourts sales consultant to gain a better insight into the local market, so you can accurately assess the market value of the property. You should also consider obtaining an independent property valuation.
If you’re new to auctions visit a few before attending the auction of the property you wish to bid on. It will familiarise you with the process.
Sometimes the property may be sold prior to auction day. You can submit a pre-auction offer to the property owner for their consideration – a key step of identifying your interest in the property. If you have let the sales consultant know you are interested in the property and another purchaser submits a pre-auction offer, you’ll be given the opportunity to submit your own offer.