Avoiding auction agony

8 October 2019

Avoiding auction agony

Auctions can be stressful – and not only for sellers and buyers. There’s a lot on the line and, as a sales agent, you want to ensure things run as smoothly as possible and the best outcome is achieved. Here’s how sales agents can avoid common auction mistakes.

By CATH DICKINSON

  1. Always qualify buyers

    All sellers want their auction to be a success and there’s nothing worse than believing there will be five buyers bidding on the day, only to find there are none.

    Independent auctioneer Clarence White said the biggest reason for this happening is the failure by sales agents to qualify buyers on price ahead of auction day.

    “Make sure you ask the right questions of buyers and read between the lines when they answer,” he said. “Ask: ‘What other properties have you made offers on?’ or ‘Have there been any properties you’ve missed out on at auction?’”

    Clarence said knowing where buyers are on their property journey will give you an idea of where their head is at in relation to the auction property.

    “Ask: ‘What do you think the property will sell for at auction?’,” he advised. “They might say: ‘Around $1.4 million.’ Then follow up with: ‘Do you think you’ll be the buyer?’

    “They’ll come back to you with one of three answers. If it’s a ‘yes’, then they definitely have $1.4 million (and perhaps a little more) to spend. If it’s a ‘no’, they don’t have $1.4 million to spend. And if it’s a ‘maybe’, they might still be bidding at $1.4 million.

    “So, without actually giving you the answer, they’ve told you what you need to know.”


  2. Have the hard conversations

    It’s not unusual for a seller to have a definite price point in mind for their property – and they don’t want to deviate from this. But it’s essential to have the tough conversations.

    “Some sellers can be single-minded,” Briannan Davis, Auctioneer at Cooley Auctions, said. “They’ll insist on keeping the price guide in line with their expectations.

    “But a successful auction campaign depends on clear communications between the agent and the seller. You need to give the seller the information they need to make a decision on price as early as possible.

    “No one wants to be the bearer of bad news – but, equally, you’re not doing anyone any favours by hiding the truth. That just leads to a rude shock on auction day when no one registers to bid.”

    Briannan said the key is to talk to sellers about the reality of the price they’re likely to achieve as early and often as possible – even if it’s not in line with their expectations.


  3. Educate sellers

    According to Jesse Davidson, Chief Auctioneer and Director at auctionWORKS, educating sellers is not simply about pricing.

    “Too many agents wait too long to brief their sellers about the entire auction process,” he said. “You need to explain the process as early as possible, so they know what to expect at each stage – before auction, at auction and after auction.

    “Throughout the campaign, you should be talking to sellers – not just about price, but also about feedback from the market, the number of contracts sent out, offers received and more. Then, when auction day arrives, there are no surprises.”

    Whether it’s good or bad news, Jesse said it’s the sales agent’s job to deliver it, so the seller has the right information on hand to make decisions.

    “Talk to your seller every day throughout the auction campaign,” he advised. “It’s how you build your relationship and develop trust. Then, when the auction comes around and you may need to have a hard conversation around, for example, a lower reserve price, they appreciate your guidance and will take your lead.”


  4. Use your auctioneer

    Yes, the auctioneer is there to bring the hammer down on the property. But they have so much more to offer.

    “An auctioneer can be your ‘third-party proof’ about what’s happening in the market and what a realistic outcome is,” Jesse said. “As a sales agent, you can tag team with the auctioneer to effectively communicate messages to your seller.

    “As an auctioneer, I always talk to the agent to gain an understanding about what they’re aiming to achieve for the property, so I can ensure I’m providing a consistent message to the seller.”


  5. Explain the possible scenarios

    Sales agents should always have a clear picture of the number of registered bidders and their price points.

    “You need to be in a position to effectively brief the seller about what to expect on auction day,” Clarence said. “Go through all the possible scenarios. What if there’s spirited bidding at the start and then it dies out? What if bidding is slow and the auctioneer has to drag things out? What if there are no bids at all? Or if the property doesn’t sell?

    “Prepare the seller for all the possible scenarios. Ask them: ‘What if the bidding doesn’t reach your expectations? What will you do?’ The important thing is to get them thinking and make sure they’re prepared.

    “And if you’re not comfortable doing this, ask your auctioneer. After all, it’s what we do every day.”


  6. Prepare bidders

    Briannan said one of the biggest mistakes she sees is sales agents failing to prepare bidders.

    “The agent may have qualified the buyer and know how much they’re willing to spend, but what’s been done to prepare them to bid,” she asked. “As auctioneers and sales agents, we do this every day – but the average person doesn’t.”

    In Briannan’s experience, the main reason someone doesn’t start the bidding is because they haven’t been engaged by the agent ahead of the auction.

    “There will always be the scenario where no one wants to be the person to place the opening bid – that’s OK,” she said. “What you can do is set the scene for them about where the auctioneer is going to start the bidding, with a view to making them feel more comfortable.”


  7. Encourage bidders

    According to Jesse, sales agents need to engage with bidders on the auction floor.

    “Don’t just stand next to the auctioneer,” he said. “Walk around and engage with bidders.

    “If the auction is going well, then it may be fine to stand alongside the auctioneer. But a better strategy is to mingle and engage with potential bidders.

    “And always talk to the one or two under-bidders before you approach the highest bidder. It creates competition.”


  8. Speak to bidders first

    A mistake many sales agents make when bidding stalls is to approach the seller first.

    “This sends the wrong message,” Clarence said. “It says: “We’re above reserve’ or ‘We’re close enough to sell’. You’re effectively giving the game away to the bidders.

    “Your role is to achieve the highest price for your seller. So, when bidding stalls, talk to the highest bidder or the under-bidder. You should only talk to the seller once you’re confident you can’t achieve a price increase.”

    Clarence said the first question a seller is going to ask is: ‘Are you sure there’s no more money in the room?’

    “By talking to bidders first, you have an answer to this question. You’ll know if the bidder has reached their limit. Or perhaps they’re not bidding because no one else is bidding. Finding out this information means you can help your seller to make an informed decision about the next steps.”


  9. Don’t reveal the reserve price too early

    Showing potential buyers the written and signed reserve document is a growing trend.

    “By revealing the reserve, many agents believe they’re showing buyers that they’re being transparent – and they are,” Briannan said. “However, be cautious doing this. You should still be trying to get as much money as possible for your seller, and revealing the reserve can remove the possibility of a buyer paying above that price.

    “The error is using this strategy too early or as a substitute for negotiating with the buyer. Revealing the reserve should be the last step in your negotiation process. If all else fails, show them the reserve. Then they know that it’s not you as the sales agent who’s standing between them and buying the property; it’s the seller.”

    Briannan added that you should always ask for the seller’s approval before revealing the reserve price.


  10. Don’t call the property ‘on the market’

    Jesse said the words ‘on the market’ shouldn’t be used under any circumstances.

    “Even if a property is ‘on the market’, that doesn’t mean we can’t try and get more money for it,” he said.

    One of the worst things an agent can do is come out onto the auction floor and announce that the property is on the market.

    “It effectively takes all the options away from the auctioneer,” he said. “Let the auctioneer know the property is selling by whispering it in their ear, then the auctioneer can deal with everything else from there.

    “What you lose by calling a property ‘on the market’ is the ability to go back and ask for more money. Always consult your auctioneer, because they will have a better read on the bidders and how much money may be left in the room.”


This article first appeared in the Sep/Oct REINSW Journal.

Want more?
 

Related articles