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Bryce Holdaway Blog post by Bryce Holdaway

Auction: A Love Hate Relationship

Understanding why there’s such a love-hate relationship in why buyers and sellers don’t really like the auction process but the real estate agents do is really understanding what’s in it for the real estate agent and the first thing is basically, vendor paid advertising for them personally and their business’s brand. They’ve got the big billboards up, they’ve got advertisement and they’ve got a big campaign usually a four week campaign in place, leading to auction day and so it’s really good for exposure. It’s really good for their brand and it’s really good for their business. So they have a very strong incentive to go to auction if it’s an auction sort of centric area and I guess the other thing to keep in mind is during the campaign they are exposed to a lot of buyers and on that day they can see other genuine bidders who are interested in property similar to that and they can really talk to the under-bidders about other properties that they have and that might be suitable as well so it’s a really good prospecting tool for the agent.

Another thing to keep in mind is that they want to find out genuine intent from the vendors. If someone who’s prepared to sell actually does commit to an auction campaign that’s a really good sign for an agent because then are not only committed to paying the real estate agent’s commission but they’re also committed to paying the advertising that comes from having in an auction campaign. So it really does filter out genuine intent on behalf of the seller.

The other thing and its really for the self-interest scenario for the agent is as soon as the property is sold under the hammer, its unconditional.

That means their cheque can be banked, their commission is pretty much in their back pockets. So unlike maybe a private sale where its pretty much subject to finance or subject to building and pest, they get the deal done and they get to wait to see these conditions get satisfied and that doesn’t happen with an auction. You normally do all that prior to auction and if you’re the successful bidder under the hammer it’ll be unconditional no questions asked. So that’s a good thing for the agents.

And the other thing to keep in mind to is that agents are actually really desensitized by the whole emotion that comes from being part of the auction process. So they’re not in the emotional roller coaster of the buyer who is worried about paying too much. They are not in the emotional roller coaster of the seller’s who are worried if they’ll get a deal on the day. They do it as a systematic part of their process and that de-sensitisation is something that works to their advantage to be honest. If they are good at auctions and they are good at auction campaigns it can mean that the seller does get a really good result.

Look, I think in my experience having done this for over 15 years the most common reason I think the buyers have for not wanting to bid at auction is they have this fear that they are just going to pay too much. It’s a highly emotional environment. The auctioneer’s job is to create competition and its kind of a public speaking environment where lots of people don’t like to be in that space and so they use the fact that they’ve got some price running through their veins and they’re very nervous to their advantage and quite often draw as much as they possibly can out of the buyer to pay. I think the biggest fear that buyers have is that they’ll unwillingly in an emotionally charged environment pay too much for a property.

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