Hammer Talk – Understanding Results
It’s the words heard from sellers at many listing presentations, “down the road sold for $X and my home is better so mine must be worth more.”
Managing expectations plays as much of a key role to going from Listed to Sold, just as marketing and choice of agent do. Whilst comparable sales are an excellent gauge of what a property is worth, we need to understand the entire negotiation not just the result.
This is where auction campaigns separate themselves. It’s the entire negotiation process on show. Prospective sellers see how many people were bidding, where they stopped and then where the price was negotiated further.
A few weeks ago, we auctioned 97 Briens Road Northmead which was a potential duplex development site on one of the busiest roads in the area. The owner’s expectations at the start of the campaign were in the early $900,000’s and through the campaign they received an offer at $930,000 but decided to run through to auction.
On the day of the auction two parties registered, one of which was the buyer that offered pre-auction (buyer 1). The reserve was $950,000 but the owner would take anything in the early $900,000’s. We received an opening bid from buyer 2 of $900,000 which I then responded to with a vendor bid of $910,000. Buyer 2 again offered $940,000 where the auction stalled. Buyer 1 who made the pre-auction offer was out, the agents negotiated buyer 2 to $950,000 then $955,000 where the property was sold.
If a seller a few doors down wasn’t at the auction and all they saw was that the property was sold for $955,000, all they do is compare the price and property to theirs without understanding the situation. Effectively only 1 buyer competed at the auction and moved their offer $55,000 from their opening bid. Now knowing that our purchaser is out of the marketplace where is the next highest bidder?
You could argue that the underbidder was at $930,000 even though at the auction no offer was placed. So, with the top buyer removed from the marketplace effectively the owner’s property two doors down sits between $930,000 and $955,000 (if it was the exact same style of development site).
Understanding the marketplace isn’t just knowing what properties sell for but it is understanding how the result was achieved. The more auctions you attend as a spectator in your area the more information and credibility you will have in the marketplace when talking price.
With this knowledge, your ability to manage the expectations of sellers will improve your auction efficiency.