Auction Hints                                    from Lindsay Warner Fellow SAA

Hint 1

Under the new legislation the “Auction Record” shall be completed as the Auction progresses.

Eg.  The first 8 lines shall be completed prior to the auction commencing followed by the result or Negotiating Parties details if any offers are made “after the auction”. 

Finally ensure the vendor, auctioneer and auctioneers clerk sign the bottom of the Auction Record after completion of all negotiations under auction conditions as witness that all information is a true and correct record of how the auction progressed.

This Auction Record is required to be kept for 5 years after the auction and it is one of the first items an OCBA Inspector will check when they attend at an auction.

In closing the Auction Record is colour coded “GREEN” for easy recognition.

Hint 2

Always remember that an auction does one of two things:
1.             Sells the property or
2.             Makes is saleable.

Remind vendors or potential vendors that an auction is a process and the property can sell in:

Stage 1             Prior to the auction,

Stage 2             At the auction or

Stage 3             For a market driven price based on the results of Stage 1 or Stage 2.

There is no doubt a vendor (and agent) wants a property to sell on the day for a “record price” however this can lead to an emotional roller coaster for the vendor (and the agent).  Yes it may sell on the day however always remind the vendor it is a process that needs to be conducted thoroughly and professionally.

Hint 3

In any market the selling of a home is not so much about selling the home as “selling the circumstances”  eg Downsizing, Upsizing, job transfer, Deceased estate, mortgagee sale etc.  Once you have established the circumstances you can assist the vendor achieve their goals and remember an auction is the best way of establishing the price in the most open and transparent manner in the shortest possible time.

This is why the Public Trustee, Government Departments and Banks etc use this method of sale because the “circumstances” require an open and transparent manner of sale; and all prospective purchasers are given the opportunity to secure the property.

The auction process is also the one opportunity to secure a premium price based on competition that is created for your vendor.

Hint 4

All persons who intend to bid at an auction must be registered, however if a bidder arrives late or decides to “put up their hand” during the auction, the auctioneer simply has to hold up the auction and wait for registration of the bidder.  This registration of the late bidder is done by the auction assistant as this allows the auctioneer to continue informing the audience and other registered bidder pf what is happening. 

Always ensure you have enough helpers at the auction to ensure all processes can be smoothly handled .

Under the new legislation there are specific requirements to perform specific tasks at specific times for eg:-

            Auction Record completed before auction commences

            Reserve Price amended in writing as variation occur

            Bidders registered before the auction commences or before the bid is taken

            Prescribed forms handed out etc etc etc

As a team all individuals must act together to ensure a smooth auction and a successful result.

Hint 5

When preparing for an auction on a Saturday morning or any other day, always give yourself plenty of time to prepare yourself, the home, the vendor and the documentation for the actual open.

Obviously all documentation, contracts etc have to be on display 30 minutes prior to the auction time. This in itself may sound simple however look at the following allocation of time which may be required and if not allowed for could throw all your best time management out the window.

Consider this?                                                                                                 Time Elapsed

7 minutes         to put out sign boards                                                                         7

5 minutes         to talk to vendor upon arrival at house                                               12

6 minutes         to turn on house lights and get house light and bright                           18

4 minutes         to get documents from car and put into house                                    22

4 minutes         to brief auctioneer                                                                             26

8 minutes         to speak to prospective purchasers/variations/registrations                 34

4 minutes         to give final briefing to vendors and sign off variations                         38

5 minutes         to ensure OCBA inspector has viewed Auction Record etc                43

2 minutes         to relax                                                                                             45

So as you can see if you pull into the street barely half an hour prior to the auction you could be scrambling to fit in all your jobs in. 

BE EARLY…..BE PREPARED

Hint 6

February 2009 was the launch of the Messenger Community News Mortgage Choice Golden Gavel competition.  Held at the Grand Masonic Lodge on North Tce Adelaide, it was the largest crowd ever at the launch of an event and perhaps there were a few reasons for this:

1.             The new legislation has meant that suddenly training and education are a major necessity to survive prosecution for breaches of trivial or heaven forbid serious breaches of the new laws and regulations and any opportunity to be involved in a major training and education event.

2.             There is a growing number of young auctioneers who wish to compete in this event as they realize that the door is opening as some older experienced auctioneers hang up their competition gavels.

3.             The Auction Idol event, now in its 3^rd year and still growing strongly, continues to attract interest and is now clearly a recognized career path for our future real estate leaders.

This event was also the announcement of the top 10 auction listing Principles and Consultants for the previous 12 months.  Brock people featured strongly in this top 10 and congratulations to the following:

Consultants

Nick Baranikow             Brock Harcourts Adelaide

Rory Butterworth           Brock Commercial

James Juers                 Brock commercial

Principals

Steve von der Borch      Brock Harcourts Semaphore.

Hint 7

“To sell or not to sell (prior to auction)?”

Two years or so ago when the market was “screaming” along, my recommendation was always to hold your nerve and take the property to auction; as generally a higher price result was achieved.

In this current climate, my recommendation is to seriously consider any offer prior to auction, and with full acceptance from your vendor, take this offer “under auction conditions”.

However, DO NOT DO THIS AS A SOFT OPTION… 

I understand that currently there may be only one interested/registered party and to put this person to contract prior to the auction, you are acting in the best interest of your vendor.  However if the property is attracting interest from two or more parties and you are of the opinion that there may be some competition on the day, discuss this with your vendor, hold your nerve, and still go to auction.

But remember the 3 main considerations:

1.             Always act in the best interests of your vendor (and not your own)

2.             Do not take an offer just as a soft option, (hold your nerve)

3.             Always discuss the options in detail with your vendor so they can make an educated decision.

Hint 8

“Are there any types of homes you would not auction?”

Now I would normally respond “Auction the Circumstances” which was the subject of the Tip of the Week from Week 3 however…….consider the following….

Homes I May Consider Not Auctioning:

1.                  Homes that the vendor has given specific instructions they do not want to auction even after the auction process has been explained and demonstrated and to continue with the auction argument would lead to missing out on the listing.

2.                  Where the property or land is in such a unique emotional or geographic position that the number one buyer will be the most likely to pay a premium to ensure they are the purchaser; and there appears to be no other purchaser who will compete to the same level (price) at the auction. A recommended method of sale on this occasion may be “Expressions of Interest”.

         Eg: The land is next to a nursing home/school/commercial building that requires room to extend a car park or building development and this development cannot happen without acquiring the neighboring land; and is the only neighbor with this immediate requirement.

3.                  Homes in a town or suburb where currently and traditionally houses very rarely sell under auction conditions however the potential to offer unique , rare or highly sought after locations should always be considered an auction opportunity and  actively pursued.

Hint 9

“How much interest is there in this auction property?”

We all like to know the answer to this one and by “interest” we do not want to know how many hundreds of people have come through the home during the marketing or what the neighbours are thinking the home may sell for or how many people said they were going to turn up on the day.  By “interest” we want to know how many of these people have:

1.             Requested changes to deposit and settlement and the vendor has agreed to them

2.             Had building inspections

3.             Come back outside of open inspections with family or friends

4.             Had their finance approved and have evidence of this

And finally

5.             How many have registered to bid either before the day or at the auction;

Because the absolute truth is that if you do not have any of the above 5 then there is a fair chance you will not have any registered bidders at the auction.  

If there are no registered bidders, the auction should still take place because you never know who may come out of the woodwork and show late interest; and for the rest who have been to the home during the marketing, they are all potential purchasers and vendors so treat them with respect, follow them up and results will come.

Hint 10

An Auction is all about the Negotiation.

Let’s not just think about the Auctioneer standing in front of the audience. 

1.             Lets talk about the first time we meet with the vendor and you wish to Negotiate for a sale by auction,

2.             Lets talk about Negotiating with potential purchasers/bidders and variation to terms and conditions,

3.             Lets talk about Negotiating the reserve price,

4.             Lets talk about Negotiating a variation to the reserve price,

5.             Lets talks about Negotiating with the highest bidder.  

An auction process commences from when you first meet with the “potential” vendors until the contract is signed.  Stay alert, know what the next Negotiation may be about and have the answers ready.  As much as some (read many) Real Estate Professionals do not like having role plays as part of on-going training, practising the above Negotiation phases makes it much easier in the field.

Have a great auction weekend.

Hint 11

“Be Clear With Your Directions”

We are involved with auctions on a regular basis.  Our Vendors Are Not.  This is quite possible the Only Auction they will be involved with in a Lifetime, so ensure you spend the time and educate them What is going to happen and When and Where you need them to be at what time.

The following are examples of instructions you need to give:

1.       Required at the house 10 mins before the opening up for a quick chat

2.       Go for a walk in the park or down to the local coffee shop to relax

3.       Return to the house 10 mins before the auction for a final briefing

4.       Its OK to stay in the house or be in the front yard for the auction but we need to know where you will be. (Do not wander off for a smoke or a chat with the neighbors)

5.       If having a meeting before, during or immediately after the auction, we only want the vendors (No family, No best friends, No “well meaning” advisors).

6.       If the property sells (No alcohol until the contract is signed and No party poppers).

7.       Vendors sign the contract after the purchasers so they need to wait (somewhere else) for at least 15 to 20 minutes after the successful purchasers have entered the home until they get to sign.

8.       Ask them if they wish to meet the purchasers (they don’t have to or may not want to)

Do not take anything for granted.  Keep your vendors Informed and Educated to the process and Maintain Control.  You are the professional they have employed to make it work on the day.  Do you job?

Hint 12

“Do not get Emotional.  Stay Calm and Professional”.

Over the years it has amazed me that if a property does not sell on the day, under auction conditions, some sales consultants are almost as emotional as an uneducated vendor.

This certainly does not help because if the consultant has built up the vendor’s expectation in regard to a selling under the hammer, and this does not happen, then the emotional let down can be substantial.

If the expectation is too high, the vendor/s may feel embarrassed because they may have told their family and friends about what the home is going to sell for Even Before the Auction Commences; and then when it does not sell the auction is deemed to be a failure.

An auction is the one chance to achieve a price above expectation but if this is not achieved then this “market research” is one of the quickest ways of determining a market driven, final sale price.

Keep the vendor/s informed of the market feedback on price all through the campaign and do not be afraid to give honest feedback.  It will save heartbreak in the long run.

Hint 13

“Who says the home is worth $700,000?”

Valuers rely on a history of comparable sales to determine what a home may be worth. 

A Real Estate agent relies on very recent feedback from prospective purchasers to determine what the market is prepared to pay. 

If a home has been on the market for an extended period of time, irrespective of location or quality, it will be the price which is the issue a majority of the time.  

Just because this style of home in this location 2 years ago always sold for this amount does not guarantee the same or higher price now.

When discussing an auction strategy with the vendor, it is critical that the home is marketed at the lowest possible price the owner “may consider” accepting.  It they continue to request a marketing price (read emotional price) which you just know is too high (in this market) they are doomed to failure.

So, as an educated sales consultant, do not hang yourself out there with a history of comparable sales, listen to the market, seek advice from other experience consultants and advisors, and ensure the vendors understand correct pricing strategies.

Hint 14

“Working with the Buyers”

As much as we spend time with the vendors to keep them informed of the process, how many buyers do we have, setting the reserve price etc etc; to make an auction process work effectively we need to spend time with the purchasers or those people who have indicated they have an interest in the property.

Some prospective purchasers may have never bid at an auction or even been to an auction (worse still, only seen one on TV).  Talk them through the process, organize to meet at the house or your office to have a one on one discussion about how to bid, how to register, what variations to deposit and settlement are possible, what time to arrive at the auction, what will happen before, during and after the auction, even what the auctioneer may say at what time.

Let them know how much interest there is in the property because one day this person may be a vendor and as we know, information is gold.

The more information the prospective purchaser/bidder/buyer has, the more likely you will have a result. 

So Remember:-,

The better relationship you have with the vendor, the better will be the result.

The better relationship you have with the purchaser, the better will be the result.

Hint 15

“Never be Surprised”

Unless there is an offer on the table, the vendor will have no decision to make. Therefore it is critical that activity on a property is generated (via marketingstrategy) to create this offer.  Sometimes the response from an overpriced vendor is “you have not brought me any offers to consider”.

However, buyers generally do not put offers on an overpriced property because they do not want to “offend” the owner or just do not think their offer would be considered, because it may be well below the asking price.

An auction marketing campaign is designed to start at the lowest possible price the owner is prepared to take (and this does not have to be the reserve).  By starting at the lower end of the pricing expectation, buyers will recognize the opportunity and activity is created.

On the day of auction, the bidder’s response will be a strong thermometer of the market price and they may pay more than they originally gave indication they would. If the bidding falls below the reserve, the vendor may accept a figure they never gave an indication they would.

Never be surprised what a purchaser is prepared to pay until they are confronted by it.

Never be surprised what a vendor is prepared to take until they are confronted by it.