For many, auctions appear to be a more daunting and complicated option when it comes to selling your home. Many private sellers are unsure if this is the right sales method for them to choose, so, in order to help you decide if this is the best avenue for you to pursue, here is our definitive Private Sellers Guide to Auctions:
Can you hold an auction as a private seller?
Absolutely yes! Private sellers can choose to sell via the auction method and can hire a licensed auctioneer to undertake this on their behalf.
Why choose the auction sale method?
In a seller’s market, or if there is fierce competition for your property, auctions work well. Auctions are also more of a structured process: you’ll know exactly how long your campaign is going to be run and by having a deadline (the auction date) you’re not prolonging the process.
What is the best approach?
A 4-week auction campaign is often the best avenue. The first two weeks test the market to see what interest there is from potential buyers, plus give you a gauge on price, with the auction then held on the 4th Saturday.
Hiring an auctioneer when selling privately:
While costs vary between $200 to around $625, it’s a general expectation that $1000 is usually at the top end of the scale when hiring an auctioneer. It’s also worth noting the bulk of that fee is to cover professional indemnity costs. A simple Google search can help you locate an auctioneer in your location but you must ensure they are licensed. You can check this by logging on to www.fairtrading.nsw.gov.au . NB: in Victoria auctioneers aren’t required to hold a special licence – an agents’ representative certificate will suffice.
It’s also wise to book your Auctioneer well in advance so you have as much time as possible to advertise the date and time of your auction and help build more interest in your home.
One of the most overlooked costs associated with auctions is marketing. You need to manufacture a buzz around your home and the sale, so you need strategies to attract enough buyers to create a competitive auction. This means extensive marketing, well in advance of the auction. Popular methods include:
- Real estate websites and upgrades
- Social media channels
- Newspaper advertising
It can be expensive to cover all these options off but buyers won’t be compelled to attend the auction if you don’t create a convincing reason for them. Don’t be tempted to cut corners when it comes to photography and text – these are crucial elements in attracting buyers interest.
How to set a reserve price:
This is an important step in the planning process. If you fail to set a reserve price you will be legally required to sell your home to the highest bidder – even if it is well under the amount your home is worth. You’ll need to undertake a comparative market analysis, which is essentially like an appraisal, but less formal. By examining at least 3 properties of similar standard or condition as yours, which have been sold within 6 months and are in a 5km radius of your home, it will enable you to determine your reserve price.
On the day of the auction:
The auctioneer will need to either display their name prominently or announce their name at the start of the auction. They will also need to advise if there have been any late changes to the contract before they commence proceedings. The process varies a little from State to State as to what is required of bidders, but here is a brief overview:
New South Wales:
All potential bidders must receive a copy of the Bidder’s guide before the auction, which contains important information such as how you register to bid and ID required. By law, there also have to be a clearly visible display of auction conditions clearly visible for all potential bidders.
Only registered bidders can place bids. They must register with the auctioneer, who will give them a unique identifier to use, such as a numbered paddle.
Bidders do not need to pre-register in order to buy at auction.
Prospective buyers need to register interest and show photo ID.
No registration to bid is required and auctioneers will read the conditions of sales of freehold property form before bidding starts.
Registration is required in order to bid at auction.
Bidders are obligated to pre-register before they can place bids.
The auctioneer must display a copy of the conditions of sale for a minimum of 30 minutes before the auction begins, along with the contract for the sale. Potential bidders must be registered prior to making a bid.
If an auction is moving too slowly, an auctioneer is permitted to make a bid on the vendor’s behalf. Designed to get the momentum flowing, it’s also aimed at raising the price closer to the vendor’s expectations. However, vendor bids will still be no guarantee the property will be sold. There are variances between each state and territory in Australia including:
New South Wales
Only one vendor bid can be made per property auction.
Auctioneers can accept vendor bids but only up to the reserve price.
Multiple vendor bids can be made by auctioneers.
Up to three vendor bids (lower than the reserve price) can be made, and the auctioneer must announce them as they happen.
Up to 10 vendor bids (under the reserve) are allowed.
Vendor bids are unlimited as long as they are disclosed to buyers.
There are no limits to how many vendor bids can be made.
Post auction – what happens next?
If your property surpasses the reserve, your home is officially on the market. Once that hammer falls, it’s officially sold. No cooling-off period will apply so the highest bidder will be legally required to purchase the home at the final price. Alternatively, the property can be passed in if the reserve price has not been met. A sale might still be made however, if you undertake negotiations with the highest bidder and sometimes it can be still purchased under auction conditions, which means no cooling off period will apply.
If you are interested in knowing more about the benefits of being a private seller, the team at Property Now are here to help you. As experts in the ‘Agency Assisted Sales’ industry, we work hard to empower the public with the right knowledge and insights to secure outstanding results.