By Kirsten Craze
Taking a property to auction in a hot market is a no-brainer. When buyers are out in force, it makes great financial sense to let them battle it out for the best price. Alternatively, as markets cool and clearance rates fall, some vendors and agents can shy away from putting homes under the hammer.
However, selling by auction can create the ideal environment to not only establish a real time price-check, but also define a period to get buyers to act.
Across NSW the property market is transitioning, but that doesn’t mean it’s time to lay down the gavel, according to REINSW’s auction-savvy experts.
Considering the weight of clearance rates
Chairperson of the Auctioneer Chapter Committee, Jesse Davidson of AuctionWorks, said although clearance rates across the state have fallen since the beginning of the year, agents should help vendors look at the bigger picture.
“Clearance rates got down to 52 per cent and now we’ve noticed a bump back to around 60 per cent during the last couple of weeks. That's definitely encouraging,” he said.
“These rates can be a funny gauge, and don’t forget we’ve recently been so spoiled with percentages up in the 80s and 90s. In all honesty, a clearance rate between 60 per cent and 70 per cent is actually quite buoyant, while 55 per cent to 65 per cent is quite normal,” Mr Davidson said.
He added that sellers should also be aware of how the figures are calculated.
“Owners might say, 'Why would I auction when clearance rates are under 60 per cent?’ But what people really need to take into account is the wider data. Once we conduct the auction, or it’s sold prior or withdrawn, we then follow up the agent over the next two weeks. When you incorporate those next couple of weeks a 60 per cent clearance rate goes up to about 85 per cent.”
Putting days on market into perspective
Generally, the longer a home sits on the shelf, the more buyers will lose interest. Mr Davidson said sellers should therefore be reminded an auction creates a sense of urgency.
“A lot of agents I talk to are asking me why auctions are still the best method of sale in the current market. I believe the most important metric for an agent - and more importantly for a vendor right now - is days on market. The data clearly shows auctions absolutely reduce days on market.”
As both metropolitan and regional markets transition off the back of an incredible boom, Mr Davidson said time is of the essence for sellers.
“Potentially, we’re looking at a period where things are not going to get better in terms of price so you really need to get on and off the market as soon as possible. An auction obviously provides the quickest and most transparent way to transact an asset.”
Auctions allow for flexibility
Matt Nicastri, member for the Residential Sales Chapter Committee and agent at Cunninghams Property, agreed today’s hesitant buyers are seeking transparency.
“More than ever, that’s what they want as the market changes. So, provided the property is priced correctly, they should be able to see their competition in the flesh and that's really critical at the moment.”
He added that nervous vendors shouldn’t worry about pinning all their hopes on one day.
“A lot of emphasis is placed on the day of auction when in fact it should be more about the process and the ability to control when negotiations happen,” he said.
And there is also no reason to stick to tradition when it comes to the length of the campaign.
“We’re coming out of a period where homes were selling so quickly, but that's no longer the case. There's no doubt you’ve got to do things a little differently and read the play in your particular market right now. So we're doing five and six-week auction campaigns in some cases. Most properties are taking a little longer to sell now so why wouldn't you have your auction campaigns reflect that?” Mr Nicastri said.
The bidders are out there
Properties which perform the best in slower market conditions, said Mr Nicastri, are those which have broad appeal across a number of buyer groups from first-home buyers to downsizers.
“With a good agent and auctioneer combination you really only need two bidders, and in some cases one bidder is all it takes. We’ve had a number of one-buyer auctions that have been really successful,” he said, adding that in times of transition the market just needs to find its level - and auctions help make that happen.
“We're already seeing an increase in registrations and improved sentiment now that people have a better understanding of what interest rates are likely to be. Buyers have been treading water, but when the market finds its level, registered bidders will return. But ultimately, if properties aren't priced correctly, then you're simply not going to get multiple registered bidders right now.”