The Sellers Guide to Auctions – Video
As your appointed salesperson, it is my goal to achieve the best possible selling price for your home. The purpose of this document is to inform you about the auction process in general and my role and activities in particular. I will cover the following:
- Buyer Classification & value of feedback
- Buyer registration procedures
- Pre-auction offers & Protocol
- Vendor bidding
- Setting reserve
- Auction Day Process
The most critical thing at this time is…never, ever under any circumstances, tell anybody anything about the price of your property. This will adversely affect our intention to get you a premium price, if there is one in the market at the present time.
Perhaps the best starting place in understanding how we go about the auction process is for me to tell you how I classify buyers who inspect your home. This also involves interpreting the feedback that they give me.
The first category includes genuine buyers who are seriously interested. They are identified through their first inspection of your home, as they work through the issues of suitability for their needs. (As a result of this process some potential buyers will decide not to proceed any further because the house does not fit their specific and often unique needs, and we then place them in category three.)
In the second category we include neighbours, friends, relatives, and the ‘Sunday drivers’ who just drop in because they saw our signs. These people are very important ‘influencers’ in our selling strategy. This is the group that often talks to potential buyers who have not yet inspected your home. They may be workmates, relatives, friends, colleagues, etc of a strong potential (but as yet, unidentified) buyer.
The third category is made up of buyers looking to purchase in the immediate area and are in a position to buy your home. However for a variety of reasons they will not do so. Generally, these buyers are often very knowledgeable about values in the area and they do not carry any bias for or against your home, because of their lack of intention to purchase it.
Value & Usefulness of Feedback
The three main categories of buyers who inspect your home will voice different opinions on many aspects of your home. (Price, being but one.) Each buyer category is of different importance to us in establishing the credibility and usefulness of the feedback.
Buyers in the first category usually say very little about price and we expect their best price indications will be lower than what they may eventually pay. If you were a serious buyer would you say to the Auction salesperson what you are prepared to pay on Auction Day? In most cases these buyers have an initial, broad price band in mind and our intention is to ensure that they are aware of the competitive process in place for the auctioning of the property. Generally, they do not know what they will really do in the future, as is the case for many of us, and we won’t report their ideas on price to you. However if they are heading towards making a pre-auction offer or it is getting close to auction day, we will report back to you.
The majority of people in the second category will have no idea of what your home is worth, and any opinion is uninformed but tends to be slightly on the higher side. It is not until they are identified as a serious potential buyer that their ideas on value become more credible, at which time we will try to solicit a price range.
It is the third category that is of most value to us in determining what the current market value range is. These people are often able to tell us about your competition and the comparative market advantages or disadvantages that your home presents. We take their opinion of value very seriously as history shows that their price feedback is generally a very good indicator of the final selling price.
It is important that we explain how we register buyers that inspect your home because this is a system that benefits you whenever we prepare or receive a pre-auction offer. It is vital that all other salespeople register their buyers and this is something we insist on because it keeps us informed of the level of interest of all identified buyers. (It also allows the introducing salesperson, who may become the selling salesperson, the right to claim a share of the commission if their buyer is successful in purchasing.)
To qualify for this a salesperson must electronically register a buyer, which is automatically forwarded to the Auction Division. (Reviewing these registrations gives us the opportunity to collate and analyse overall interest so that we can act in your best interest, prior to or at the auction.)
There is a fine balance in deciding whether or not to seek or consider a pre-auction offer. If a buyer decides to definitely make a pre-auction offer, it must be in writing, unconditional, and have a 10% deposit attached. It must also have an irrevocable time period in it. This will be conveyed to you by the auctioneer, regardless of price level. If the offer is at a level good enough for you to stop the auction, other registered buyers are informed of your decision to sell prior and they too are invited to make an offer or attend an auction date bought forward.
It is your decision to consider prior offers and care should be taken before making any recommendations. However, experience has taught us that all registered buyers must be given an equal opportunity to submit a pre-auction offer.
Pre-Auction Offers – Protocol
All salespeople must first discuss the merits of presenting a pre-auction offer with their manager. Salespeople or purchasers are not able to initiate this themselves and you will be consulted before the procedure commences so as to be fully informed. The manager or auctioneer must consider that the intended pre-auction offer is significant enough to stop the auction process.
Pre-auction offers must be unconditional, in writing, should be accompanied by a 10% deposit, and contain an irrevocable 2 working day period.
As a general rule we recommend that you do not counter-sign such offers. To do so would defeat the major advantage of the auction process by declaring your hand as to price/expected reserve level.
Once the intention to submit is known, we recommend that you do not accept or consider any pre-auction offer for 24 hours or until your auctioneer has worked out the best strategy for you. This allows all registered parties to be invited to attend an auction which has been bought forward, and thus maximising the competitive environment that we are seeking.
Normally, the number and level of pre-auction offers clearly dictates what the next course of action should be.
As a company with over 60 years of experience in auctioning real estate in the Auckland region, Barfoot & Thompson is still managed by the names on the door! Our working directors honour the families’ long reputation for trust & integrity as the foundation of our relationship with our clients.
Different companies have different ways of running their auctions but one procedure has been heavily emphasised by the directors and that is that our company auctioneers do not make or accept any phantom or vendor bids.
It doesn’t matter what you call them, they are not real bids and that is why we do not allow them. The benefit to you is that the true buyers are identified and they declare the price level at which they will make an unconditional offer to purchase your home. This professional practice has increased the credibility of Barfoot & Thompson with clients and their legal advisers. Because of this standard, prospective purchasers know that they are competing only with genuine people and are more likely to enter into the competitive spirit of the process.
The alternative is to run an auction where the auctioneer “vendor bids” and unfortunately can be left holding the highest bid himself, at a price in excess of where the market sees the real value.
Setting the Reserve Price
A few days prior to the auction is time to confirm your reserve price by meeting with our Auctioneer, Murray Smith. We have already given you price information where most of the interest in your property lies. At the meeting with Murray, you will discuss strategies and tactics for your auction. The need to set the reserve is simple: this is your mechanism to motivate the buyers to become competitive bidders. A poorly set reserve can destroy the potential of a premium price on auction day. The number of interested parties and their competitiveness helps us formulate the following strategies –
The Auction Day Process
- The reserve is reached and the property is sold ‘under the hammer.’
- During the bidding process you have the opportunity to review and adjust your reserve.
- This review can ‘place the property on the market’ and allow all parties to compete to own it at the end of bidding.
- The highest bid price fails to reach your reserve and an attempt is then made to increase that person’s bid.
- If bidding does not reach the reserve price, the property is ‘passed in’.
- The highest bidder then has the immediate right to meet your reserve and buy the property.
- If the buyer does not meet your reserve we will then encourage them to commence negotiations.
- All other interested parties then have the opportunity to submit offers.
- If further offers are unacceptable it is important that we then establish a fixed asking price and continue marketing and advertising to find new buyers.
Particulars and Conditions of Sale
The draft set of our Standards Particulars and Conditions of Sale must now be finialised for the auction. Your solicitor should by now have approved, in consultation with you, any alterations to meet your requirements.
One of the biggest single factors that can improve the chances of success of your auction is flexibility of settlement date. We generally suggest a settlement date of the sixth Friday after auction. Sometimes however, a flexible settlement period is a big inducement for some buyers; we recommend this if at all possible because it allows more buyers to participate in the process and with more competition there is greater likelihood of a higher price! (Some buyers have requirements for either quite short or relatively long settlement periods, because of their particular circumstances.)
Please don’t break the silence on price information!