“You also have to be confident in your response and you can do this by being well equipped, understanding your rights as an auctioneer and knowing what you can and can’t do.”
Setting the reserve price
Jesse and Damien agree that the most important number an auctioneer needs to know is what the property’s reserve price is, and to ensure that it is in writing. The next most important number is the price that the vendor wants to sell the property for.
Damien says some vendors will often give a reserve price above the price they are willing to accept, with on average most setting it 3% above what they will sell it for. He added that good agents will always make sure they find out what the owners’ motivation is for selling.
Damien said: “We are not just there to market the property and sell it. The conversations you have with owners is almost like their psychologist to a degree, where you speak to them about what they can and can’t do with their money.”
He added: “One of the best tips for an auctioneer is to always make sure you get your owner to sign off on any adjustments to the reserve price. In our reserve letters we have a section where it can be amended.”
Knowing how many bidders are registered is crucial for an auctioneer to base their decision on where they place a vendor’s bid, and what level they place it at.
Damien said: “It is not just the number of bidders, but what is the strength of those bidders.”
Jesse added: “It is important to find out as much information as possible about the purchasers beforehand because this can help you know who is serious.
“If a potential buyer has paid for a building and pest report it shows their motivation, because they have been willing to commit money before the auction.”
Increments, starting bid and vendors bid
Damien says it is important to set the bid increments correctly by speaking to the sales agent to find out what they have been quoting throughout the campaign.
Auctioneers should also be prepared for no starting bids and get instructions from the seller when to exercise a vendor’s bid, or when to hold off.
Damien said: “Your vendor’s bid can be flexible and it is important you get an undertaking from the owner what they would like the figure to be depending on different scenarios.”
Damien likes to have the flexibility to use it at his discretion. This is because you might decide beforehand on when to make the vendor’s bid, but the body language you get from potential purchasers tells you it is not the right move to make anymore.
Jesse added: “You need to be able to think on your feet and be adaptable. You need to act like you were expecting every scenario to take place and that can be difficult.
“If you have reserve of $1.2 million and someone opens the bid above it, it is easy to be like a deer in the headlights, but good auctioneers will handle these circumstances and keep the momentum going.
“It is important to have different strategies and expect things to go wrong.”
- Ask the agent is there an absolute minimum acceptable figure
- If a bid is below the reserve, don’t panic - place the vendor bid at that price
- Not every bid is a good bid. A lot of buyers will make a bid which auctioneers can be quick to accept, but a great auctioneer can push back and suggest a higher increment
- Identify if there are any potential purchasers who will ask a question and approach them beforehand to answer their concerns to avoid it becoming an issue during the auction
- Don’t be afraid to make a ‘phone call for legal advice.
Find out more by watching Damien and Jesse discuss this in a webinar REINSW held here.