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Buying at Auction

Buying At Auction

Overview of the auction method

The very best means of achieving a premium or fair market value for a property within a specified time is Auction. The deadline for the sale creates a sense of urgency among buyers and sales consultants alike. The word 'auction' derives from the Latin word 'augere' which means 'to increase'. Dating back to Roman times, auction is one of the oldest methods of selling and yet today is the most advanced method of marketing real estate. Auction involves a short, sharp and intensive marketing campaign of a property without a price. This is to test the market to see what buyers, in a competitive situation, are prepared to pay to become the new owners of that property. Marketing with a price limits what a keen buyer may pay. Once a listing price has been established for a property, a ceiling has been placed on what a buyer expects to pay for it. Auction, on the other hand, offers a real opportunity to get more for a property than the seller might expect. Our objective is for the seller to have the highest price possible offered for their property by the end of the auction campaign. A well-run auction programme may take more time and effort for the consultant but will ensure that the property gets the maximum exposure. It is certainly the method that offers the highest degree of responsibility and control shared between the consultant and seller. Through auction, buyers are prompted to pay their top price by: • the deadline • confirmation of value and desirability by other buyers/bidders • fear of loss to a stronger or keener buyer/bidder.  

The three stages to auction

There are three opportunities to sell a property using the auction method.

STAGE 1 In the lead-up period high profile auction marketing will highlight the property, producing the greatest exposure during the period when enquiries are likely to be at the highest level.

STAGE 2 The auction itself is the shortest part of the process but it is the best opportunity to sell during competitive bidding in an open arena.

STAGE 3 Post-auction period - some people believe that if the property does not sell on the auction day then the auction system has failed. This is not true.

Stage three provides opportunity to negotiate with those who may need to sell another property or arrange finance before they can commit themselves unconditionally.:

Benefits to the seller

• The seller sets the terms, conditions and deadline.

• This auction-oriented target marketing puts the `spotlight' on the property, adding a competitive edge that strongly favours the seller.

• The property is neither overpriced nor undersold; its value is determined by the market and individual buyers.

• The `no price' aspect will attract more genuinely interested, cash-in-the-hand buyers.

• It allows sellers to plan ahead in the knowledge that a specific date has been set for the sale of their home.

• A cash buyer means the seller can proceed immediately with their goals.

• A sense of urgency is created by the set timeframe, bringing interested buyers to a point of decision.

• The level of market interest will help the seller gauge the reserve price, with the real possibility of achieving a premium price.

• The seller has the option and may decide to accept a cash offer prior to auction day.

• Those who attend the auction will be focused on establishing the maximum price they will pay, not how little the offer should be.

• The seller controls the terms of transaction and actively participates in the sale process.

• A successful purchase requires a payment of a deposit on the day, equal to 10% of the purchase price.

• If the property is passed in, it will be exposed on the open market as an exclusive listing at a saleable price established from the market feedback received throughout the auction process.

Buying at auction avoids the traditional offer / counter offer negotiation process. Everything is out in the open. If successful, the buyer will have the satisfaction of knowing they have purchased at `true market value.' In addition:

Benefits to Buyer

Buying at auction avoids the traditional offer / counter offer negotiation process. Everything is out in the open. If successful, the buyer will have the satisfaction of knowing they have purchased at `true market value.' In addition

• A set auction date allows the buyer to better plan and arrange finance, sell their existing property, organise a property check, familiarise themselves with all the auction documents and consult their solicitor.

• They can submit an offer for consideration prior to auction. All pre-auction offers must be cash unconditional.

• If the property is passed in, their sales consultant can help them enter into negotiations.

. To become familiar with the process it's a good idea for buyers to attend an auction prior to bidding at one