Auction vs Private Treaty

Lately, there has been a lot talk about low auction clearance rates. “Experts” tell us that these low clearance rates are a good reason to steer away from choosing an auction to sell in the current market. Quoted clearance rates are below 50% at the moment. And, if auction results were more accurately reported, the clearance rates would be even lower. Many auctions are cancelled because of a lack of buyers, but they are not recorded as a failed auction when calculating the clearance rate. It wasn’t long ago that auction clearance rates were up around 85%. It seemed every auction had plenty of enthusiastic bidders pushing the price past the reserve with confidence. We are in a new market now which requires new approaches and a different set of skills to effect a sale at the highest price. Any property will sell if the price is right. Therefore there are two questions: What is the right price? And, which method of sale will ensure the highest price in this new market?

There is some evidence suggesting that an auction might not be the best approach right now, however, there are some benefits in using an auction in this new market in certain circumstances. Buyer behaviour has changed recently. The pressure on buyers is reduced and there is no sense of urgency for them to take immediate action. Consequently we are seeing buyers holding back on making offers or in even showing interest in properties, preferring instead to play a bit of a waiting game. They put the pressure back onto the seller to make the first move, demanding a price cut. In some circumstances an auction can help put the power back into the hands of the seller by setting a deadline and creating a sense of urgency. If the buyer likes the property, they have to act or else risk losing it. A genuine buyer can’t hide when the property is going to be auctioned.

A word of caution though, think carefully before you choose auction. It can be highly stressful and if not handled correctly, mistakes can be costly. This is not a job for amateurs. You need a highly skilled and experienced agent in this new market whichever method you choose.

Chris Hopkins is Principal & Licensee at Raine & Horne Hornsby. He has over 20 years experience in sales, sales management & sales training to major franchise networks. He now runs a dynamic team serving the local community. Formed in 1883, Raine & Horne is one of the oldest privately owned companies in the Southern Hemisphere and is currently in its fourth generation of family ownership. Chris & Susie Hopkins have owned the Hornsby franchise since 2016.

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