Auctions: The art of give and take

Auctions: The art of give and take

20 January 2021

By Kirsten Craze

On its surface, the classic game of chess and the business of real estate might not appear to have much in common, but one auctioneer says the art of ‘give and take’ translates to both worlds.

REINSW auctioneer committee member, Leon Axford of Axford Auctions, said a recent father and son exchange got him thinking about the common trades that buyers, sellers and agents make in the property game.

From chess moves to property plays

“My dad and I hadn’t played chess together for about 15 years and I’d never beaten him. We started playing again recently and I won three in a row. During a game he’d made a move and I looked at it, and thought ‘well, if I'm going lose that piece, then I want to get something in return’. It was set up where I thought we’d trade bishops, but it ended up a different way. I turned to him and I said, ‘what did you get out of that trade?’ It was that comment that made me think. You could almost look at business a bit like that,” Mr Axford said. 

“I said at a training session the other day, you guys are trading your time right now. You could be on the phone prospecting, be putting a deal together, but you're trading that opportunity to sit down and hopefully learn something about auctions,” he said.

“You can look at life and business as a series of trades. What’s a job, if it’s not trading expertise and time for a return in a financial sum? When you start to look at things a bit differently, then you start to value your time a bit more,” he said.

Choosing a method of sale

Mr Axford said savvy sellers should be looking at their method of sale and considering what they might be trading, or indeed giving up.

“Private treaty, from a seller's point of view, means there’s going to be a cooling off period. It means they commit to the buyer, but the buyer is not 100 per cent committed to them. A seller is giving the buyer time to do their building and pest report and to make sure their finance is sorted. But a buyer is giving up the transparency of seeing their competition eye to eye.”

Whereas an auction gives the seller the ability to set a date, Mr Axford said. 

“That's the date a negotiation will happen, that's the day everyone makes a decision and gets to see the competition. Buyers get the time to do all their inspections; make sure they like the place, get their finance ready, and be sure they're happy with the building and pest reports. All the seller wants in return is an unconditional transaction and a 10 per cent deposit - these are the tradeoffs,” he explained.

Managing the fear of auctions

Many uninitiated buyers, and sellers, can fear the auction process because of its reputation as a high-stress transaction. However, Mr Axford said by outlining the tradeoffs between private treaty and auction, agents can help consumers make more confident decisions.

“We’re trying to change the perception of it. We talk to our clients a lot about not making auctions a threat, they should be positive for all parties. Buyers get to see there's somebody else there, and that they're buying something of quality that other people want. And they get time to think. It’s about not rushing people into decisions,” he said.

“If a buyer then wants to bring things forward and wants to rush the seller’s decision by making a pre-auction offer then they're giving up eye to eye transparency. By rushing the owner’s timeline, the trade off as a buyer is losing the ability to see their competition, plus they're still giving up a cooling off period and 10 per cent,” he said.

For the seller, there are also tradeoffs as auction day approaches, Mr Axford explained.

“Towards the end of the four weeks they can review it, see where they're positioned. If they feel that the best thing to do is to sell beforehand then they can, it’s unconditional and both parties commit to each other,” he said.

“Or they work through to auction day and accept a price. Buyers will come and make bids, and if it gets to a level the seller is happy with then they accept that price on the day. It's done. The seller doesn't have to worry about the buyer pulling out. They get finality.”

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