There's a myth among many home sellers that going to auction is the best way to guarantee the highest price for your property. But is this true?
If you're thinking about selling your property at auction, first spend a few minutes thinking like a buyer.
What thoughts will be going through your head as you begin the bidding process?
- I hope no-one else wants this property
- Let's hope this goes cheap
- I'm not going to go over my limit
- I'm not sure if I know what I'm doing
- Auctions are a great way to get a bargain.
None of these thoughts are conducive to bidders offering up the highest price for your property. In fact, the whole process is built around starting at the lowest price.
So why are so many home sellers heading down this path?
There's no doubt that auctions can have short-term advantages – they can be quick and deliver an unconditional sale, not dependent on the buyer achieving finance. But these short-term gains are far outweighed by the risks.
Among the general home-buying public, research shows that more than 90 per cent of buyers don't like auctions. Auctions instead attract bargain hunters such as investors and property dealers. But how often do these people sell at auction? Very little in my experience!
To understand why, you need to examine the basic principles of negotiation:
Always start high: Getting the best price for your property means starting high then negotiating. Auctions, on the other hand, start low.
Negotiate in private: In a private negotiation, buyers need to offer their best price. In a public auction, they only need to offer a little more than someone else.
Talk with keen buyers: Some people want your home, others just want a bargain. You will always achieve a higher price when the buyer wants your home, not just any home. Keen buyers also want the property now – they don't want to wait four weeks for the auction to take place.
Don't limit your market: If so many individuals do not like attending auctions, are you limiting your potential market? And what happens if only one genuine buyer turns up to your auction? How can you get the best price with only one bidder in the room?
Auctions are all about hype and theatre. They assume buyers will be carried away in the heat of the moment to pay more than a property is worth. But don't be fooled – the average buyer is smarter than this.
So if you want to get the best price for your property, you need to think like a buyer and act like a seller.