It is a misconception that auctions have always been the favoured method for selling properties in Australia. The trend for auctions varies state-by-state, with it much more common to come across an auction on a Saturday in Melbourne than it might be in rural Victoria or other capital cities. Yet the countrywide interest in the auction as a method for selling a home has grown over the past two decades. Figures from CoreLogic reveal that in 2008 the proportion of dwelling sales that sold at auction sat at just under 10% for houses and 6% for apartments. Over the next ten years, the proportion of house sales at auction in Australia doubled to just over 20% and tripled for apartments (increasing to approximately 16%).
With the proportion of dwelling sales in Australia selling at auction accounting for a little over a fifth of nationwide dwelling sales, it is clear that if a property doesn’t sell at auction, you may find that you have better luck in a private sale.
When a property is passed in at auction
As much as an auctioneer might try to employ some of their auction strategies for getting the best price for their client, the vendor, sometimes there is not enough interest in a property on the day to reach the vendor’s reserve price.
The number of times an auctioneer can make a ‘vendor bid’ on behalf of their client (to help drive up the price of a bid to the reserve) depends on what state you are in. Rules at a property auction differ by state. For example, in Victoria, an auctioneer has no limit on the number of vendor bids they make (even though this rarely exceeds a single vendor bid in an auction as it risks putting off bidders), while in NSW this is restricted by law to a single vendor bid.
If bids fail to reach the vendor’s reserve price, or there have not been any bids at all, the auctioneer will pause the auction and consult with the vendor to decide the next step. If there have not been any bids at all, then the auction must be passed in. If there have been some bids but they do not meet the reserve, the vendor can either lower their reserve (and make this publicly known so as to hopefully drive up bidding) or pass the property in.
If a property doesn’t sell at auction
If your property doesn’t sell at auction, as up to a third of properties fail to do, then you have three options:
1. Put the house back on the market.
There can be various reasons why a house may not sell at auction, and have very little to do with the property itself. But if you do decide to put your home back on the market, consider a few things when you do.
Do you have the right agent? Remember that when choosing a real estate agent to sell your property, there are a number of questions you can ask them to find out whether or not they will be a good fit for you. If your property hasn’t sold on the market, look back on some of these questions you might have asked them and see how the agent has performed against their answers and your expectations. For example, how communicative have they been during the marketing process of your home? Did they update you with the state of the market and the state of your own property’s performance during inspections?
Very often, the failure of a home to sell at auction has little to do with the agent and more to do with the market conditions, but it pays to take a look back at your agent to see if you want to continue with them when selling your home.
Revise your pricing. Analyse the market and the performance of similar properties in your local area to gauge whether you are being realistic or not in your expected selling price. Consider whether or not lowering your reserve will end up being better than any costs you may incur from not selling your home a second time around.
How can you better market your home? Are there better ways to market your home? Are there tools you can use to find out what people are looking for? For example, if your agent doesn’t currently offer it, suggest to them the creation of a simple digital survey that potential buyers can conduct after inspections to let you know what they liked about your home and what they believe you could do to help it sell. You may pick up on a trend that potential buyers would like your bathroom to be in a better condition, which means you might want to do some cosmetic renovations, or you might get comments on the lighting of the house, in which case you might explore different ways to light your home at inspections.
Professionally stage your home. Staging your home can be a great way to invite potential buyers to imagine themselves in your home, with less of your own styling imposing on their experience of the property.
2. Private sale only
If your property doesn’t sell at auction, you may want to consider putting it up for private sale only. This means you will only incur the costs of marketing your home, rather than also having the costs of holding property inspections.
Weigh up the pros and cons of using an agent vs selling your home privately, and consult those you know who have sold homes in your area. You may live in an area where auctions are less common, so that a private sale will cost less and may see the property staying on the market for longer, but with you inevitably finding the price you are after.
3. Take your property off the market
It can be hard to accept that selling a property quickly isn’t always feasible, especially when you are at the mercy of the market and state of the economy. It may be your best bet to take the property off the market and wait until conditions are better. It is possible to still get the price you are looking for in a buyer’s market, but you might do better to wait (if you can afford to do so) and sell your home in a seller’s market (when demand is high and supply is low).