“Boy oh boy”, the screening of the Nine networks The Block, Glasshouse has really put our industry and particularly Auctions back under the microscope. I haven’t read or heard so many comments from so many “experts” in a good while. TV, talkback radio and social media were all abuzz with “what went wrong” with many agents rushing to Facebook to condemn the performance of some of the Auctioneers, which I think was particularly unfair.
Those that know me are aware that although I’ve been an Auctioneer since 1993, for the past 14 years I have been an advocate for selling residential property by Tender. I personally believe it is a better method of sale than Auction and over the next few weeks I’ll use the Block as an example to explain why.
In this first blog, I’d like to look at the performance of the Auctioneer’s.
The Block is reality TV so let’s start packing some “reality” around this. The Auctioneers’ were vastly experienced and all have excellent reputations with great track records. Ray White Auctioneer, Haesley Cush has been awarded REIQ Auctioneer of the Year on three occasions and is recognized as one of the best in the country. Let’s face it with an audience of over two and a half million people no Agency is going to put up a second stringer, so the comments that some were terrible auctioneers is simply absurd.
REIV data tells us that Flats/Apartments Auction clearance rates for the 11th and 12th October were 66% so with a clearance rate of 100% I’d argue that the Auctioneers did a pretty good job. All properties sold under the hammer at above the reserve price. One of the reasons that I prefer Tenders over Auctions was once again highlighted at each Auction.
Most of the debate focusses on the differences in the eventual sales prices … So, how could the results have been different if the Properties went to Tender instead of Auction?
The highest bid at an Auction will only ever be driven by the underbid. Put simply, when the under bidder stops, the competing bidder only has to go high enough to outbid them. This was demonstrated on the show when we consider the couple who bid on three of the five properties. It was the gentleman with glasses and the lady with him.
On the first property they were the under bidders who joined the bidding at $1.51 million and pulled up at $1.8 million, it sold for $1.81 million.
On the second property they were the under bidders, started bidding at $1.75 million, stopping at $1.85 million, it sold at $1.9 million.
They bought the third property, starting at $1.69 million, beating the under bidder and paying $1.71 million. We know that they had more money as they went to $1.8 million at the first Auction but they didn’t have to spend it, they could keep $90,000 in their pocket.
What I am suggesting is that if they had sold the properties by Tender, none of the bidders would have been aware of what the other tender prices were and they would have to “King Hit” it with their best offer. Maybe, just maybe, they would have spent that other $90k and perhaps a little bit more, who knows.
Next week we’ll take a look at the level of stress experienced by each of the Vendors and how this would have been greatly diminished by selling at Tender. See you then !