No surprises were seen coming out of the weekends 1100 auctions.
Except 1! Whilst the market returned a resounding 68% clearance rate, it was the more affluent suburbs that faltered. Yes, there were some big ticket sales but the clearance rates of the normal auctions within these suburbs was well below the norm.
In Brighton, the clearance rate including those sold before Saturday was 55%, on the day, 48%. In Kew, the clearance total was 56% but in the day you only had a 50% chance of selling your property. In Toorak it seemed no agents could get any properties away before the weekend and then could only manage a 56% clearance rate for the suburb. Malvern agents managed to get 1 property sold before auction gives the suburb a clearance rate of 66%, however, again if you were actually putting your property to auction over the weekend you had a 50 / 50 chance of success. But the standout suburb for all the wrong reasons was Canterbury. There were 8 auctions reported to the REIV. None were sold prior and 2 of the 8 were sold over the weekend. Clearance rate of 25%.
This is not something new. As the overall clearance rate increases, the negotiations become more delicate. For any of you who are transacting a property, either buying or selling, do not assume that a property for auction, goes up for auction and sells on the day. NOTHING COULD BE FURHTER FROM THE TRUTH. In fact, we negotiated far more properties in a one on one fashion in 2007 than we purchased under the hammer. In fact in the first half of the year when the average clearance rate was in the 80% range, there was an average of over 100 properties bought prior to auction every week.
If you have a good selling agent who is looking after your best interests he or she will contact all buyers, and try to ascertain their interest levels. If you have two or more buyers at a similar level, and this is an acceptable level to the vendor, then the agent should almost always push through to auction, or the set date for negotiation. This means the auction should reach a better result with some emotional bidding near the end. A good auctioneer should feed these last $1000 bids to ascertain the best price.
If your selling agent informs you that there is one standout party and potentially others, but at a much lower level, then there is a very good reason to look for an offer before auction day. Passing in to the highest bidder only serves to prove to the public there is no better offer than what the property passed in at. If your agent is negotiating on the Wednesday or Thursday prior to auction, the single standout bidder does not yet know what the competition will bring. And any offer placed after midnight Tuesday still has no 3 day cooling off period.
Further to this line of thinking, the auction campaign is not always the only way to sell property. Most agents will try to get a fairly hefty advertising budget, usually in the vicinity of 1% of the value of the property, and then proceed to spend it all within the four week auction campaign period. If the property sells for what you wanted then everything seems fine, if it does not you are out of pocket up to $10,000 for a $1M property and you have nothing to show for it. Sometimes it may be better to investigate the market before going out with a full auction campaign. Most agents can get a property on the market with brochures, floor plans and internet marketing for a few thousand dollars. Most buyers in the market place will see the advertising on the internet and you may get some bites before a full blown marketing campaign.
Ian James
Director
JPP Buyer Advocates