It's a stressful day for homeowners, so it's important that you know what you need to do before the time comes.
Firstly, it's super important to listen to your agent the week of auction. They are the experts you have entrusted to achieve the very best outcome for you. No reputable agent want's a bad sale price attached to their name, so a great outcome for you means they have a chance to shout from the hilltops and drum up some more business.
But there are a few things you will want to know and your agent should know.
How many buyers are expected to turn up to register?
This information should be roughly known the Monday before the auction, however will be firmed up by the day prior to auction.
What happens when contract change requests are sent through to your solicitor by the purchaser's solicitor?
Please don't respond to your solicitor with answers before you speak with your agent!
I have heard of owners knocking back 3 buyers with a 12 week settlement request because they wanted the settlement to be 6 weeks as per their contract to find out the only buyer that turned up on auction day was the 1 buyer that was willing to do a 6 week settlement but they now have no one to bid against. Make sure you allow your agent to advise you on which buyers you should and shouldn't approve contract change requests. it could mean the difference between selling or not selling on auction day.
This is a good thing. Don't be offended because a buyer wants to adjust a few things in the contract, it's normal. Contract change requests is a great way of knowing how many buyers are willing to spend money with their solicitor to ensure they are ready to bid on auction day.
Consider if accepting a settlement date that is different to what you originally wanted (or is written on the contract) will really impact your life. If you can deal with a change of settlement and it's financially doable, I would strongly recommend that you follow your agents guidance on this. Having extra bidders at your auction will only improve the final sale price. IF your home sold for an extra $50,000 due to additional bids on your property, is it worth the change of settlement?
What reserve price options do you have?
There is nothing wrong with dream reserve price on paper, so long as you have a reality reserve price in mind.
A reserve price is set based on a number of factors.
Feedback from the buyers.
Agent recommendations.
Owner Expectations. Make sure your decisions when setting the reserve are considered in the exact order above.
Buyers won't pay what you need, they will pay what they are willing to pay plus a premium based on competition and their budget. So keep this in mind when setting a reserve.
Your agent will provide you with the best possible comparable sales to explain why they feel a particular reserve price should be set. Just because a property sold in the same street 6 months ago for a certain high price does not mean it is considered a comparable today. Market conditions change daily. Banks will not look at data older than 6 months when doing valuations for purchasers loan approvals, just like they will not look at sale prices of properties that have not settled yet. Taking off your owners hat and thinking like a purchaser will allow you to look at your property less subjectively.
Always have a back up reserve price ready. Remember I said that there is nothing wrong with having a dream reserve price? However, if the bidding is slowing down during the auction and the reserve price is still a long way away, your agent will come to you and you will be able to advise your agent and the auctioneer of the new reserve price quickly and efficiently so that the momentum of the auction continues.
The back up reserve should be in line with the market and at or slightly above where the current bidding has stopped.
This number should be your worst case scenario - an amount you are willing to sell for should no one else bid above it. Remember, once someone bids at or above this number the auctioneer can drop the hammer and sell the property, so predetermining this number before auction day is extremely important.
Making quick decisions will ensure that the agent and auctioneer can come back to the bidders and keep working. Slowing down the auction gives buyers time to think and once this happens logic takes over what is meant to be a time for emotive decisions. Always have your answers ready for the agent and act quickly.
Knowing when to set the reserve
Don't set the reserve when you're signing the agency agreement. I know there is a section in your auction agency agreement that states: Auction Reserve Price - however this price will likely be at the top of your agents estimated opinion of sale price (ESP), or, above it. Once you set the reserve price in writing, the agent is unable to quote below this number, which means the sales campaign will be lacklustre or might even fail due to doing this.
The reserve should be set the week of the auction, ideally the day prior when your agent will want to hold a 'Vendor Reserve Meeting'. This will allow the agent to gather as much information about each individual buyer and understand where to best recommend the reserve to be set.
Sending the agent an email or sms advising that you wont sell under a certain number can also create complications for your agent. This written record will need to be acted upon by your agent, and should it be above the agents ESP then the agent will need to quote no lower than this number.
Buyers will always look at your property and compare it to other properties on the market for a similar price. So if your agent is quoting $4,000,000, buyers will typically add 10% to that price to establish if the home is worth it. That means if you advise your agent that you will not sell under $4,400,000, then the agent will need to quote $4,400,000 and buyer will add an extra 10% on top to establish if your home is still of interest (and within budget) at $4,800,000 or more. Once a buyer decides your home is not worth it, they will focus elsewhere and your agent will have a hard time trying to create the right buyer competition. The result will impact you significantly.
Pass in or Negotiate live?
Your auction is about to shift gears, or have the breaks pumped hard at this point. A novice auctioneer may recommend passing in every single time at this point, however a trained negotiator as your auctioneer will be able assess if every buyer has put forward their best or are simply waiting for someone else to push them. Couple this with your agents expertise and you have yourself a very strong chance of executing a successful sale with just 1 buyer still prepared to secure the home.
Passing in sends a number of messages to the buyers watching and to the market when they see your home still for sale the following week.
We want to much - This is the first reaction from buyers when you pass in or don't sell on auction day. It's a very had label to remove and can cost you a lot of money in the long run.
We are prepared to negotiate with a specific buyer - This happens when someone is clearly the highest bidder and often occurs after they have placed a bid beyond the 'Vendors Bid'. Sometimes it is best to enter in to private negotiations with your strongest buyers behind closed doors. Taken away the pressure of a crowd and allow time for the buyer to speak to their loved ones or calculate their budget. It also give you as the owner time to discuss what will happen if you let this buyer go and have to start from scratch when Monday comes around.
Negotiating live can encourage the best buyer to big against themselves in order to achieve the property whilst keeping them in an emotive state. It can also send a message to the other buyers in the room that the home is going to be sold if they don't throw their hat in the ring now. Trust your agent and your auctioneer to guide you on the best path to take, but understand what implications come with each decision.
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