Five things to remember for your inner-city property auction

By David Servi

1. Stay in the room.

Professional auctioneer David Scholes is Spencer & Servi’s auctioneer of choice. He has sold thousands of properties, and he has some advice for the novice seller: stay in the room.

“The thing that owners have to understand is that they’re going to have to make a decision somewhere through the course of the auction,” he says. “And if they’re hiding in a back room, not actually watching the auction or hearing the auction, they really don’t know what the mood of the crowd is”.

He says agents hurrying backwards and forwards to consult with an owner can interrupt the momentum of the auction and dissipate building excitement and competition.

2. Accept a reasonable offer

“The owner needs to be aware of the mood of the crowd,” Mr Scholes explains. “If they see that bidding is really becoming strained and people are shaking their heads and saying no, there’s definitely one person who is holding the highest bid, but they’re looking as though they’ve hit their limit, and it’s $10,000 below the reserve price.

It’s often good for an owner to see that, so they can say ‘that looks like the most I’m going to get, so I’d better take it’.

“Deals fall over all the time, literally because an owner refuses to take a bid that’s $10,000 below their reserve price, and then they wait for five weeks to take $30,000 below their reserve price”.

3. Don’t rush to sign on with the agent promising the biggest sale price

Spencer & Servi always provides realistic estimates, but some agents are not so scrupulous. “A lot of agents will go in, particularly when the market is really buoyant, like it has been, and put a ridiculous price on the property to try and con the owner to an extent”, Mr Scholes said. “The owner then thinks ‘this fella thinks it’s going to make that much money, which is a lot more than the other agents had said. Gee that’s good; I’ll go with him’.

“Then of course, there’s a bit of a Catch-22,” he adds. “That agent is forced to tell the market that they believe the price of the property is X, which is five or ten per cent higher than anybody believes. Then nobody turns up to the auction, or if they do, they’re not going to be bidding at the level the auctioneer is suggesting”.

4. Do your research and expect a reasonable auction return

“After the three or four week campaign, a good agent will have spoken to all the people that inspected the property, made sure they understand who is interested and who is not, and more importantly what price these people are interested at, so they can report back to their owner and give the owner a really clear indication of what the market thinks their property is worth,” he said. This is Spencer & Servi’s practice, and we take pride in the accuracy of our estimations.

So, Mr Scholes said, there can be three different figures. The first is the figure that the agent believes the property is worth. Secondly, there’s the owner’s estimate. “From my experience, 99 times out of 100, they think their property is worth more than it is,” Mr Scholes said. Thirdly, there’s the buyers’ price. They are in the market, week in and week out, Mr Scholes said, and they generally have a very good idea of what the property’s worth. It’s sometimes a little below estimations by both the agent and the owner, he adds.

5. Set a reasonable and carefully thought-out reserve

A day or two before the auction, the agent delivers the last report to the owner, lets the owner know how many registered bidders there are likely to be at the auction, and the levels the bidding is likely to reach, Mr Scholes said. Spencer & Servi begins encouraging interested potential buyers to become registered bidders as early as possible.

“Then, on that information, if the owner is a serious seller, they’ll set their reserve somewhere in that vicinity, sometimes a little higher, but with some flexibility”, he said. “Then we put it to auction and hope to get the best price we can”.