IS THERE ANYTHING BETTER THAN A PUBLIC AUCTION?
Many agents will say, "No!" but then again, they are trained to say that.
A Public Auction may achieve a sale, but how can they guarantee to get the highest price?
Buyers Agents represent purchasers, and not home sellers. A Buyer's Agent assists purchasers to buy cheaply. This is what one Buyers Agent** had to say about public auctions:
"I attend many (public) auctions and bid for properties on behalf of my clients. At the majority of the auctions where we were successful, we had 'money left on the table' - that is, we spend less that our authorised limits." **
**Patrick Bright - Buyers Agent & Author of "The Insider's Guide to Saving Thousands at Public Auction"
No negotiation expert favours allowing competing parties in a negotiation to hear what another party has offered, yet this is what public auction does.
A better alternative to public auction is to negotiate privately using the Buyer's Price Declaration. It is called a "Silent Auction".
Based upon an idea developed by economist the late William Vickery - one of several ideas that earned him the Nobel Prize for Economics - this negotiation tool is demonstrably better than public auction for sellers, buyers and agents.
With the Buyer's Price Declaration, no competing party is privy to another party's offer. This means that each buyer must offer his or her highest price without being influenced by what somebody else may have offered.
For more details and to discuss how a "SILENT AUCTION" will help you achieve a better result, call our office on (03) 9836 8000.
HOW PUBLIC AUCTIONS GET LOWER PRICES
Homesellers tempted to auction their homes should remember five words: PUBLIC AUCTIONS GET LOWER PRICES.
Never mind what agents tell you, never mind what you read in the papers, public auctions are a financial minefield for consumers.
Thousands of homesellers are turning their backs on public auction and benefiting. But there are still thousands of sellers who don't realise, until it's too late, what happens to them at public auction.
They get a LOWER price, that's what happens.
If someone is trying to talk you into selling by public auction, then before you sign anything, please read this.
NINE REASONS PUBLIC AUCTIONS GET LOWER PRICES
The Starting Price
It seems as if the price goes up at public auctions. But that's only because it starts LOW. It's like starting the day with a massive hangover and saying that you are going to feel better as the day progresses. That's not a good reason to get drunk every night. Avoid drinking and you avoid the hangover. You start the day in good shape.
And that's how your sale should start - from a good position, a position of strength, not of weakness.
One of the BASIC principles of price negotiation is to ALWAYS START HIGH.
You will get a much higher price if you start higher and come down, than if you start lower and try to climb up. When you start low, you can get stuck low. It's like climbing up a mountain or down the mountain. When you are climbing up you runout of energy a lot faster than when you are climbing down.
If you want a higher price, START high. Public Auctions start low.
This is how public auctions get lower prices.
If you want the highest price, do NOT make your lowest price the main focus of the sale.
There is no procedure at a public auction for determining the highest price a buyer will pay. Only the highest price of the losing buyers may be known because they stop bidding once they reach their limit. But the buyer who is the highest bidder often buys at less than his or her limit. Most buyers at public auction buy for less than their limit which means most sellers at public auction under-sell their homes.
You can't possibly get the highest price for your home if the central focus is on the Seller's Lowest Price. You can only get the highest price if the focus is on the Buyer's Highest Price.
As a seller, you are at a huge disadvantage because your lowest price, the "reserve", is always disclosed BEFORE the home is sold. That's when you hear the agent yell, "It's ON the market". Everyone knows your lowest price. Not so with the buyers. If their final price is ever disclosed, it will be AFTER the sale is over. By then it is too late for the sellers.
Research shows that more than 90 percent of buyers do NOT like public auctions.
You can only get the highest price if all the buyers who may be interested in a home are given the chance to buy the home. As public auctions repel so many buyers, the highest paying buyers often avoid auctions.
One of the BASIC rules of marketing is: make it EASY for people to buy. Public Auctions do not make it easy. They make it hard.
Many buyers see that a home is for public auction and if the date doesn't suit them, they don't even bother to enquire. The buyers that are lost in this manner are often buyers who would have paid thousands of dollars more than the auction's final selling price.
And this is how public auctions get lower prices.
Investors, property dealers and bargain hunters all know that public auctions are one of the best places to find cheaper deals in real estate. It is well-know that deceased estates and mortgagee sales are often sold for a "song" at auction. Auction agents try to justify this by saying, "Look at the banks and the Government departments. They use public auctions."
But that's because they want to make sure the home is sold. The sale is more important than the price. The banks and the Government departments are not the "owners" in the way that consumers are owners. Many banks and Government departments do not realise they are under-selling homes at public auction. Those who do, are now beginning to avoid public auctions.
Astute property investors, developers and dealers often buy at public auction. But they almost NEVER sell at public auction. That's because public auctions get lower prices.
If two, or more people want to buy the same home, the worst thing you can do, from a negotiation point, is to allow each person to SEE what the other is offering! Instead of offering their highest price, each buyer will only offer a SMALL amount above what the other buyer offered.
Public Auctions are touted as being competitive - but the competition is in PUBLIC not private - which makes it COMPARATIVE more than competitive. Everyone compares what everyone else is offering.
It's like playing cards and knowing what the others are holding. By making the negotiation so public, the buyers have a tremendous advantage over the seller. Instead of having to offer their highest price to win the auction, buyers only have to outbid the buyer below them.
To persuade sellers to publicly auction their homes, agents will talk about high prices. And then to get buyers to come to the auction, the same agents will talk about low prices. Most times both the seller AND the buyer are deceived. The sellers end up selling for less than they were told they could get, and the buyers often end up paying more than they were told they could pay.
But consider this: How do you have a public auction with only ONE bidder?
Most people think Vendor Bidding increases the price. But Vendor Bidding deceives sellers as much as buyers. It is used to get the price up to the point where it can be sold - the reserve price.
Usually, once the home reaches its reserve, the agent stops using vendor bids. The home is then sold for its lowest price.
Sells to the Wrong Market
To attract buyers, agents will market the home by advertising it to "start from" a low price. This is supposed to attract buyers. And indeed it does. But it attracts buyers who want to buy at the LOW price NOT at the price the seller wants.
Many of these buyers can't afford to pay much more than the price range advertised or verbally suggested by the agent. So, on the day of the public auction, there will be a crowd of buyers all wanting to buy at a low price.
The agent will then say to the sellers, "This is what the market is telling us." But the agent has been looking in the WRONG market - a market BELOW THE VALUE of the home.
Failed Public Auctions
When a home does not sell at public auction and thousands don't - it is labelled a "failure". Buyers think something is wrong with it and many will offer LOWER prices. Like a wounded animal with vultures circling, failed auctions are easy prey for bargain hunters.
This is how public auctions get lower prices.
These are just some of the reasons why we believe PUBLIC AUCTIONS GET LOWER PRICES. We hope it's enough to make you think carefully when someone wants you to sign-up for an auction.
CHOOSE A BETTER WAY TO SELL
Thankfully, there is a BETTER way.
If you are considering an Auction to sell your property, call Reuss Partners on (03) 9836 8000 to find out how to get the HIGHEST MARKET PRICE using a superior method to the Public Auction system.
It's called "Silent Auction".
Call us on (03) 9836 8000 for further details.