Billed as the most effective way to create a competitive bidding environment whilst ensuring transparency and an even playing field for all participants, a sale by auction is consistently the sale method of choice in a red-hot market.
But what about when prices have come off the boil?
TWICE AS NICE
Bernadette Morrison, Bayleys Ponsonby branch manager in Auckland, says that auctions remain the most effective way to deliver a sale for owners – whether on auction day or afterwards.
“Analysis from recent sales activity at Bayleys has shown that in current market conditions, auctions have become more effective at delivering results, with the auction process 100 percent (or twice as likely) to return an unconditional sale within 28 days, compared to other sale methods.
“Using data collected in the six months to June this year, we found that after 42 days on the market, listings which began as auctions were 91 percent more likely to have sold unconditionally.
“And at the 90-day mark, listings which began as auctions were still 40 percent more likely to have delivered an unconditional result than listings which did not.”
Morrison says these contrasts are stark and demonstrate the intrinsic value of auction campaigns and their ability to deliver optimal outcomes compared to other sale methods.
“The merit of the auction process lies in our ability to generate strong market interest via targeted marketing campaigns which attract the widest possible buyer pool and ultimately reveal that one perfect purchaser for the property.”
GENERATING RESULTS WITH ONE BIDDER
While competition is a strong component of the process, Bayleys national auction manager, Conor Patton, says the agency has delivered strong results at auctions where even only one bidder has been present.
“At Bayleys, we have averaged a 75 percent success rate over the past year at auctions with only one active bidder, which reflects that properties can still sell well in less competitive environments.
“With just one engaged buyer and a motivated seller, success relies upon the skill of the salesperson and the auction team.
“Bayleys salespeople are some of the best in the business, with a nuanced understanding of specific markets and a finger on the pulse of buyer appetites during auctions.
“We have a strong program of ongoing training modules to ensure salespeople are highly skilled in managing the auction process strategically. This includes overseeing bids, pre-auction offers, and seller expectations to deliver positive outcomes - because mismanagement of the process can easily risk losing a qualified buyer.”
ASSESSING MARKET VALUE
Patton says that while the data speaks for itself, in terms of an auction’s ability to secure results, Bayleys salespeople are not arbiters of value but rather present the property to the market in the most successful way.
“A cooling of last year’s red-hot market was inevitable, especially as inflation pressures, credit constraints and global unease sow a feeling of uncertainty through the economy.
“However, the fundamental reasons to move persist and an unusual lift in auction activity for this time of the year speaks to Kiwis’ willingness to see through best-laid plans.
“While buyers and sellers are adjusting to new conditions, and there is some semblance of consistency, market segments are positioned to behave differently. As a result, we expect we will see first home buyers and investors continue to seek opportunities while movers perhaps pause for breath,” he says.
Morrison agrees it is fundamentally true that good real estate sells in any market, and well-located homes with access to amenities, schooling and transit routes continue to sell well thanks to desirability and a shortage of high-value homes available on the marketplace.
“There is a shortage of high-value homes available for sale, so I expect we will continue to see a consistent level of competition for quality, aspirational properties, too,” she says.
“Whether competition is running hot or not, auctions undoubtedly remain the best tool to attract buyers and establish true market value,” she says.
“Time and time again, we see properties sell on auction day or through post-auction negotiations with purchasers captured through the auction process.
“Ultimately, securing an unconditional result through a sale by auction gives sellers a significant purchasing advantage – an extremely attractive feature in variable market conditions.”