Can you afford to sell your home at auction?

We have all heard the stories of sellers getting prices above their expectations at auction, and I am sure it is these stories that drive many of us to put our homes under the hammer in the hope it will happen to us. But realistically, unless you have a unique property that will be highly sought after, and/or you are selling in a hot market, the chances of obtaining your 'dream' price is pretty slim.

With clearance rates pretty low across the state at the moment and a subdued property market, even getting your asking price can be tough. So the question has to be why are people still choosing Auctions to sell their properties at all?

If you need to sell your property due to financial difficulties, or any other reason that requires you to sell quickly, here are a few points to consider before you decide on an auction:

You could short change yourself

Let’s say you have only two people interested in your property and your reserve is $300,000. Buyer 1 is only willing to pay $300,000 and Buyer 2 is willing to pay up to $350,000. At auction, bidder 1 bids up to $300,000, bidder 2 puts in a counter bid at $305,000 and wins the auction. Your home has sold for $305,000 at auction. However if you had your home listed with a Real Estate Agent who is a highly skilled negotiator, they may have been able to negotiate a higher price directly with the buyer possibly getting you an extra $45,000.

Can you afford to wait?

Most auctions have a lead up time prior to auction which can be weeks or months, when you take into consideration your repayments over that time and other holding costs such as rates, it could effectively cost you thousands of dollars before you have even sold your home. And then there is the chance it doesn’t sell at auction costing you more time by then listing your property for sale. We tend to focus on the sale price, but taking holding costs into consideration is important also. If your holding costs for an auction work out to $10,000 for a 3 month period, consider if you would get a faster sale by negotiating $10,000 off your sale price by listing your home for sale instead.

Your property goes stale

The risk of your home not selling at auction is that you inevitably list your property for sale, and if it is not sold soon after then it’s only a hop skip and a jump to Staleville. By this stage active buyers in your area have seen your property advertised for months and can assume there is something wrong with it, it’s overpriced or just simply undesirable - otherwise why hasn’t someone already snapped it up! And so the interest tapers off or worse you start getting rock bottom offers.

Could your potential buyers put you in the too hard basket?

Auctions just aren't for everyone. They require lots of effort on the buyer’s part without them even knowing a definite price. They have to wait until auction day to buy the property, they need to sort out their finances or get a pre-approval in place, they need to organise and pay for building and pest reports for a property they may not even buy, and they may need to attend the auction at a day and time, which may or may not be convenient. These things can deter some buyers from auction and place your property in the too hard basket.

I am not affiliated with any real estate agency at all, and this is just my own opinion from my own experiences. I have been on both sides of the fence, and I know when I have put a property up for auction I was hoping for a frenzied bidding war resulting in a fantastic price! And when I attend auctions, I am hoping to pick up a bargain. Each to their own and I definitely think auctions can be excellent for the right home or at the right time. But for anyone struggling financially or needing a quick sale, I think these points are important to take into consideration with the current market, when deciding whether or not to go to auction.

Source: Esta Hammond, author of 'Save It – easy ways to save money' and founder of EasyWaysToSaveMoney.com.au

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