What's Bad About Auctions Anyway? (Useful Information)

11 May 2017| Posted by: Matt McGrane

Auctions; It's a popular way to sell. But popular isn't always effective. I mean, whoever thought the Aussie mullet was a good look? Never the less, it caught on and if you asked someone now what on earth they were thinking back in the eighties, they would simply say, "it was all the rage!" When it comes to selling by auction, rage is the only thing you might walk away with.

Let's be clear, not all agents who sell by auction are ill intentioned, or bad at what they do. They are simply doing what everybody else is doing. But, statistics  show that overall, the success rate is, well, considering the investment, not that great. Success rates at auctions in Queensland regularly sit around 50 per cent. Once you pay for the paper advertising and the auctioneer, you could be thousands of dollars out of pocket, for maybe a 50 per cent chance that it will work. Those are not great odds when there is a proven strategy that works far more in the sellers favour. 

If you were a betting person, you might say the odds of 50 per cent seem worth the risk. But even if you are in the half that sells through auction, how do you know that you got the best price? Did the buyer pay the most that they could, or just more than the previous bidder? Did you actually have every available buyer in the market, or just the ones who could commit to the purchase on the day of auction? 

The answers are; you will never know. And the reason? Because auctions break two of the cardinal rules of real estate. 

One, the first rule of marketing: make it easy for the buyer to buy. At auction, a buyer must be registered and in a position to make an unconditional offer on that day. This is simply not a realistic position for many buyers so you may have eliminated the buyer with the best offer before the auction even begins. 

Second, the first rule of negotiation: don't let the other buyers know what your bid is. Not only do you need two buyers to commence an auction, once it starts, they all know what's on offer! Don't make the assumption that the highest bidder paid the most they were willing to pay. All they had to do was outbid the competitors. 

So, what's the alternative to an auction? Good old fashioned sale by private treaty of course. It's ethical and it works. 

At MyHouse we use the art of relationships, market knowledge and negotiation to sell houses at the best price. Why don't we use auctions? Because they don't guarantee the best price, and we would never use a selling strategy for your home that we don't believe in for our own! 

Matt McGrane

Director/Sales and Rentals Professional 

To find out more about our selling principles, click on the 'Let's Talk' button below.