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Sellers love them, buyers hate them. We look at the pros and cons of auctions and suggest tips for successful bidding.
Love ‘em or hate ‘em, auctions are a permanent feature of our residential property market.
Around 30 per cent of homes in Melbourne, and 15 per cent in Sydney are sold at auction. The figure is closer to 90 per cent in the key inner city, bayside, eastern suburbs and lower north shore markets.
Auctions are increasingly popular in the inner city suburbs of Adelaide and Brisbane. In other capital cities, auctions are generally only used to sell up-market or highly sought after homes.
The pros and cons of auctions are hotly debated. Theoretically, an auction delivers the seller a better price. Auctions concentrate interest and competition ensuring that the property sells for its maximum market value on the day.
Auctions work best in rising markets and in areas of high demand such as the inner city. By contrast, properties in fringe areas with few unique features are most effectively sold by private treaty.
Advantages for the seller
- intensifies competition by putting buyers directly against each other
- short sales cycle (usually four weeks)
- seller knows exactly how many open inspections to plan for
- fixed settlement date
- better price, particularly for sought-after properties
Disadvantages for the seller
- reserve price not always met
- can be more difficult to sell if passed in as buyers have a clear idea of what others are prepared to pay and may lower their price accordingly
- can set reserve too low and sell too cheaply
- more expensive than selling by private treaty
- seller pays for marketing and advertising costs
Before the auction:
- attend as many auctions as possible to see how it works
- study the local market
- ask rival agents what the property is worth
- conduct pest and building inspections
- pre-arrange your finances
- ask a buyers’ advocate or friend to bid if you don’t feel confident
During the auction:
- stand where you have a clear view of other bidders
- bid confidently and counter-bid immediately
- slow the bidding down
- bid in small increments
- set your limit just beyond a round figure (e.g. $410,000 as opposed to $400,000) and stick to it
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