Your one-stop guide to selling and buying property at auction
By Geoff Stevens, Manager, Harcourts Queenstown.
In recent times, we’ve seen a real surge in the number and success of properties going to auction in Queenstown.
If you’ve bought or sold property lately, it’s almost certain you’ve been introduced to this great method.
Ease any apprehension
For the uninitiated, the auction process can seem a little daunting. But it offers many advantages to both sides of the sale — and that’s why it’s so often recommended.
For both parties the biggest advantage of an auction is its transparency. Everybody knows the terms and conditions of the sale before they start, and bidders or their representatives are on site and out in the open during bidding.
1. You’re in control throughout the process.
They set the terms and conditions which mitigates the chances of any surprises at settlement. And they decide on a confidential reserve price — the minimum amount they’ll be happy to accept for their property. This control means the seller is very likely to leave the auction process with a result they’re happy with.
2. Heightened interest without a fixed price
The property is marketed with no fixed price (the reserve is kept between the seller and the auctioneer). This broadens the pool of cash-in-hand buyers who will look at the property, making it more likely they’ll find interested parties.
3. The short marketing period returns maximum results
The fixed and relatively short marketing period allows the seller’s consultant to gauge the level of interest in the property and assess what prospective buyers might be prepared to pay. This gives the seller the potential to achieve a high price.
4. Buyers feel a sense of urgency due to the fixed time frame
The auction itself generates a sense of urgency and competition which brings buyers to a decision within a restricted time frame — usually within a 3-4 week period.
The auction programme is a very organised and structured process over a defined timeframe. Sellers know when their open homes and marketing are going to take place and they have the date set for the property to be sold on.
5. Reduced risk with cash-unconditional bids
And a final major benefit for sellers is that bids must be cash-unconditional. This eliminates any buyers that depend upon conditional factors like building reports or the need to receive finance and which might make the sale less likely.
Benefits for buyers
1. You know who the seller is
Many buyers are reassured by their proximity to the seller, their consultant and the auctioneer on the auction day. It puts them at ease that they’re dealing with a trustworthy seller who is fully committed to selling.
2. You know your competition
The auction process also means buyers know exactly who their competition is. They can rest assured that they are given an equal and fair opportunity due to the “on the day” nature of this method.
3. A no-hassle and quick way of purchasing
At the fall of the hammer, the auction is final and a successful bid means the property is sold to the highest bidder with no further negotiations. The contract is signed there and then and this makes it a method of purchasing with very little hassle and no time-consuming negotiations.
4. Flexibility allows for a perfect purchase
However, buyers also have flexibility with the terms of the sale if they need it. They can request changes to conditions from the seller by using an “Aside agreement”. This allows variances to things like the settlement date and deposit amount, and must be agreed in writing prior to the auction date. Aside agreements can help ensure both parties are extremely happy with the final result.
Sometimes the property may be sold prior to auction day — but it must have been advertised as such from the outset.
An interested buyer can submit a pre-auction offer to the property owner for their consideration. Should the seller consider it to be an acceptable level, the auction date will usually be brought forward with the acceptable offer announced as the opening bid. Other interested parties still have just as much opportunity to continue with bidding — it may be, though, that they haven’t got all their affairs in order just yet so the pre-auction bidder is in a strong position.
My advice is to let your Harcourts consultant know if you’re interested in an auction property. They will be able to immediately let you know if another bidder submits an acceptable pre-auction offer so you also have the opportunity to do so.
Preparing for auction
For both parties, getting ready to go to auction brings further considerations.
Buyers need to ensure they have everything organised beforehand to allow them to bid with confidence. Their finances should be in order, they should know exactly what their highest bid can be and any other due diligence must already be completed. They also have to be able to pay the deposit on the day (usually 10 per cent of the sale price).
I recommend that buyers also have other related affairs in order by the auction date. This might be the sale of an existing property, reviewing any LIM report, organising a building inspection or having a solicitor review the property title and evaluate all legal documents.
And a tip for both parties — visit a few auctions before attending your own or the one you plan to bid at. If you’re new to the process, it’s much less nerve-wracking to experience your first auction when it’s not your property or money involved!
Our year of auctions
Here at Harcourts Queenstown, we had an extremely successful 2016 of auctions. Up to 1 December we ran over 100 auctions and 95 per cent of properties that went to auction over the year were sold.
The Queenstown market makes Harcourts auctions an extremely effective and successful way of selling and buying property. I strongly believe in the process due to the fantastic results I have seen our team achieve. Our high volume of auctions is just one reason I love managing the team here in Queenstown.
All of our consultants are passionate about this method of selling: they know that auctions are the best way to achieve results in the current market. They are excellent sources of knowledge and assurance for both sellers and buyers and I have no doubt that they are the best consultants to guide you through the process.
If you’d like to know more about the auction method or if you have any other real estate needs, please don’t hesitate to get in touch with us.