As the most open and transparent sale method, a sale by auction works best by putting serious buyers together in one place to determine a property’s true market value. But does this still work effectively when the market has cooled?
Auctions are often seen as the best way to achieve an optimal price within a timeframe as the auction process creates a sense of urgency and competition between buyers.
However, recent market fundamentals including access to finance, rising mortgage lending rates and more homes available on the market for sale mean buyers are considering their options more carefully and conducting a thorough programme of due diligence.
For sellers seeking a sale within a certain timeframe; perhaps having purchased elsewhere, or needing to move city/region for a new employment opportunity, a sale by auction has been long-regarded as an effective way to secure an unconditional sale by a due date.
The auction process also encourages transparency by placing serious bidders together in a public environment that enables all parties awareness of live bidding levels. This ultimately helps to deliver fair market value.
When participating in an auction conducted by Bayleys, everyone is on a level playing field; participating under the same terms, and understanding the sale and purchase agreement and its contents.
Another benefit of a sale by auction is that by not setting a price during the marketing campaign, sellers aren’t limited by an asking price that may be too high or too low and risks alienating certain buyers.
While there are a host of benefits to selling at auction, success relies on the ability to create an air of competition, which has delivered huge benefits to sellers during the recent market cycle.
With sale values down some six percent from their peak, a sale by auction can still produce great results by generating comprehensive market interest.
At Bayleys, an auction campaign typically runs for three weeks and utilises a targeted market campaign that spans print, digital, social media and radio channels to uncover the most suitable buyers (both passive and active) across the market for your property.
Sale campaigns also benefit from a nationally connected network of some 90 offices and salespeople that work together the effect the best results for Bayleys’ clients.
Bayleys’ national auction manager Conor Patton notes the winter months have their traditional, more subdued activity across the national sales market, however, there are bright spots including good auction attendance both physically and digitally.
“Nearly 1,000 people attended auctions in June, which was bolstered by 4,893 auction attendees online.
“231 bidders were placing more than 1,240 bids and total sales for the month exceeded $142 million,” he says.
This points to a degree of market engagement and buyer willingness to transact despite more variable market conditions.
Anecdotal evidence also suggests buyers are increasingly looking to negotiate, and a high proportion of Bayleys’ auctions which have gone unsold under the hammer have been concluded in negotiations post-auction.
In its recent monthly property report, Real Estate Institute of New Zealand (REINZ) chief executive Jen Baird noted that housing affordability remains an issue for many buyers on the market.
“Paired with tighter lending restrictions, higher interest rates and concerns over inflation we are seeing hesitancy amongst buyers,” she says.
In the absence of a deadline, buyers can continue to wait in the wings anticipating the ‘bottom’ of the market.
However, while hesitancy remains a key factor influencing buyer behaviour, it remains extremely difficult to pick the market trough, which has often passed by the time sales data becomes available.
This is another important consideration for a sale by auction as it provides a deadline which encourages interested parties to satisfy their due diligence and finance obligations.
While a sale by auction can still offer a host of benefits in a shifting marketplace, the most important consideration is your timing and strategy.
With each residential property having its own unique features and factors it can be hugely beneficial to engage your Bayleys salesperson early in the process so you can identify the best sales strategy that will add value, remove stress and deliver the best possible outcome.