Selling by auction is also an Exclusive Agency agreement and is therefore also subject to the 60-calendar day agreement period. The auction process requires the seller to pay the agent to arrange effective marketing and advertising plans to maximise exposure of the property and the auction date to potential buyers.
Under the auction system, the seller agrees to pay commission to the listing agent if the property sells before the date of the auction, at the auction or in an agreed period after the auction.
The same conditions that apply to the auction process will also apply to the tender process.
There are many advantages to selling a property at public auction, in particular:
- An auction is a three pronged marketing push. The vendor has the option to sell your property before auction, on the day of auction, or in the event the property is passed in, directly after auction.
- There is an ability to set a reserve price and a settlement date to suit the vendor.
- As the reserve price is not disclosed it gives the vendor a chance to test the market.
- A written marketing plan with pre agreed appointment times enables the vendors to arrange their lives during the lead up period.
- The auction process by its very nature creates a sense of urgency; buyers have a definite time frame in which they must act. Buyers see the purchasers as competition rather than the vendor. Auction creates a competitive environment.
- With sale by auction all contracts are unconditional and no cooling-off period applies, in Queensland
Auctioneer: The first step in selecting the right person to conduct the auction consider who has the most to gain, choose someone with local knowledge of the area with the support of an agency that is keen to make a sale, often auction advertising is seen as a way of advertising the agency over the property. This can easily be identified if the auctioneer runs the proceedings to a timetable, the passion for the job has gone and probably any enthusiasm as well, a key ingredient. Auctioneers today are highly trained in their field having attended courses; sat professional examinations both written and practical with the REIQ. Further more; hold current registration under the Land Agents Act. When your auctioneer is a member of the Real Estate Institute of Queensland you have the additional benefit of dealing with an auctioneer who is bound by the high ethical standards of the Institute as well of their profession.
Agreement: Legislation requires that a written agreement must be signed between the seller and the auctioneer. In this, the auctioneer will require an exclusive agency for a specified period, which cannot exceed 60 days but by mutual agreement can be renewed.
Promotion: This is considered by many to be the key to a successful auction, creating interest. The auctioneer with their team has experience in planning and arranging the marketing of property including advertising. The extent of the marketing campaign will depend on the amount the vendor is prepared to spend. There is a legal obligation to clearly explain to the vendor where and how monies will be spent and will show examples of the advertising mix. At this sage the vendor's input is very important to help identify the probable market. (More info..)
Arriving At A Reserve Price: It is the vendors right to set the reserve price, below which the auctioneer is not permitted to sell. Consult with your agents when setting the reserve price, as they will be familiar with recent sales of similar property in the area. Remember to be realistic when making your appraisal, bearing in mind supply and demand in the area as well as other general market considerations. (More info..)
Selling Before The Day Of The Auction: It is not uncommon for interested buyers to make offers on properties prior to auction day. Some will be on fishing expeditions of course, to try and find out the reserve. However, most will be genuine, in such cases the agent will discuss the offer with the seller, and a decision can made to either consider the offer, or continue with the auction as planned.
It is not unheard of for the vendor to sell the property prior to going to auction, in this case the agent will generally, on the vendor's instructions, invite all potential buyers to also make an offer. The seller then accepts the most appropriate offer, and contracts are signed prior to the auction date.
Auction Day: There are a number of possible outcomes at an auction:
- Should the highest bidder reaches or exceeds the reserve price - the property is sold and the auctioneer will conclude a binding contract between the buyer and seller. The auctioneer may sign the contract on behalf of either or both parties if instructed to do so.
- In the event that highest bid falls short of the reserve price the auctioneer will usually ask for the seller's instructions before passing the property in. This means the vendor has the opportunity to accept the last bid, by placing the property "on the market" so that it may definitely be sold "under the hammer". This factor often creates more excitement, which can encourage further bidding, and a better price may be achieved.
- It can be that the highest bid does not reach the reserve price and the property is passed in - the highest bidder is generally informed of the reserve price and may be given the initial opportunity to purchase. Failing this, the property is placed on the market for sale by private treaty, at which time anyone may negotiate with the sole agent.
Tips For A Successful Auction
- Work out the appropriate advertising budget to ensure your property is widely advertised taking into account the identified market.
- Make sure the property is well presented because a potential buyer's first impressions are crucial to a successful sale. (More info..)
- Your agent will require that the contract and the accompanying statutory searches be available well in advance of your marketing campaign. Confer with your agent about this matter they should be able to provide a tick list to help.
- Allow the agent to arrange as many inspections with prospective buyers as possible it all creates interest particularly at local level this could have a significant effect on the day regarding turnout.
- For most, the spectacle will be the main draw as well as the eventual selling price so confidentiality is of the upmost importance. We suggest that you do not disclose or discuss your reserve price with anyone except your agent/auctioneer.
- Advertising material should only refer to the general area of price, not the reserve price.
A sale by public auction is arguably one of the most exciting, effective and rewarding methods of buying and selling real property.
Contact us about putting your property to auction.
Produced as a community service with the help of The Real Estate Institute of Australia's Auction Division, this letter addresses many of questions most asked about the auction process. Please use the information provided in this document as a prompt for further discussion with your agent.