1. SELECT YOUR AUCTIONEER
The first step in selecting the right person to conduct the auction is to consider who has the most to gain.
Choose someone with local knowledge of the area with the support of an agency that is keen to make a sale.
Auctioneers today are highly trained in their field and must hold current registration under the Property Agents and Motor Dealers Act 2000.
Legislation requires that a written agreement must be signed between the seller and the auctioneer. Commonly, this appointment is covered by the PAMD Form 22A that the seller has signed with their listing agent. In this, the agent or auctioneer will require an exclusive agency for a specified period, which cannot exceed 60 days but by mutual agreement can be renewed for a further period.
This is considered by many to be the key to a successful auction. There is a legal obligation to clearly explain to the seller where and how monies will be spent, and show examples of the marketing mix. At this stage, the seller’s input is very important to help identify the probable target market.
4. SET THE RESERVE PRICE
It is the seller’s right to set the reserve price, if any. The agent should be consulted when setting the reserve price, as they will be familiar with recent sales of similar property in the area. Sellers need to remember to be realistic when making their decision, bearing in mind supply and demand in the area as well as other general market considerations.
5. SELLING BEFORE THE DAY OF THE AUCTION
It is not uncommon for interested buyers to make offers on properties prior to auction day. Some will be on fishing expeditions of course, to try and find out the reserve. However, most will be genuine. In such cases, the agent will discuss the offer with the seller, and a decision can be made to either consider the offer, or continue with the auction program as planned.
If a seller decides to sell the property prior to going to auction, the agent will generally (on the seller’s instructions) invite all potential buyers to also make an offer. The seller then accepts the most appropriate offer and contracts are signed prior to the auction date.
6. AUCTION DAY
On auction day, buyers will be held to the conditions of sale by public auction. In the course of conducting an auction, there are a number of possible outcomes:
Should the highest bidder reach or exceed the reserve price, the property is sold and the auctioneer will complete a binding contract between the buyer and seller. The auctioneer may sign the contract on behalf of either or both parties if instructed to do so
In the event that the highest bid falls short of the reserve price, the auctioneer will usually ask for the seller’s instructions before passing the property in. This means the seller has the opportunity to accept the last bid, by placing the property “on the market” so that it may definitely be sold “under the hammer”. This factor often creates more excitement, which can encourage further bidding, and a better price may be achieved
It can be that the highest bid does not reach the reserve price and the property is passed in. The highest bidder is generally informed of the reserve price and may be given an opportunity to buy. Failing this, the property is placed on the market for sale by private treaty, at which time anyone may negotiate with the agent.
WANT TO GO TO AUCTION?
Here are 5 valuable tips for achieving a successful auction:
|●||Work out the appropriate marketing budget to ensure your property is widely promoted taking into account the identified target market|
|●||Make sure the property is well presented as a potential buyer’s first impressions are crucial to a successful sale|
|●||Your agent will require that the contract and the accompanying statutory searches be available well in advance of your marketing campaign. Confer with your agent about this matter as they should be able to provide a checklist to help|
|●||Allow the agent to arrange as many inspections with prospective buyers as possible – it all creates interest. At a local level, this could have a significant effect on the turnout on the day|
|●||For most, the spectacle will be the main draw card as well as the eventual selling price, so confidentiality is of the utmost importance. Do not disclose or discuss your reserve price with anyone except your agent/auctioneer.|