BACK TO BASICS - Under the Hammer

What does it take to be an effective auctioneer, one who gets the price a vendor wants? Real Estate Business’ Simon Parker talks to hardened practitioners and discovers it’s not all about quick one-liners and booming voices

Auctions appear to be gaining in popularity, so it’s little wonder there’s a big crowd in attendance at the 2011 Australasian Real Estate Institutes’ Auctioning Championships, held recently in Melbourne.

It’s the final, and while the crowd is loud and boisterous, a quick word from the MC has them hushed in an instant.

As the attendees settle back into their seats, the first contestant walks briskly to the stage… let the auction begin.

GOING ONCE

Silence.

That’s what followed most auctioneers’ opening calls at the finals of the Australasian Real Estate Institutes’ Auctioneering Championship.

More silence. The auctioneer scans the audience rapidly. ‘Do I wait?’ is the question you can see him mulling over. He ponders some more: ‘There are bidders in here, I know for certain...but maybe this is part of the test?’

“C’mon, ladies and gentlemen, where will you start me off,” he says, almost convincing himself that the first bid will somehow be close to reserve.

More silence.

In goes the vendor bid, set low enough to whet the buyers’ appetite for the delightful inner-Melbourne property.

“Can’t you just see yourselves entertaining friends this summer by the side of the pool, ladies and gentlemen?” the auctioneer asks, invitingly. “And all situated so close to the wonderful amenities on the well-heeled suburb’s trendy High Street.”

The audience stirs.

It’s enough. The attendees loosen their wallets and the bids start to fly.

GETTING THE START RIGHT IS TRICKY

Ironically, a good start at an auction often depends on the weeks that precede the big day.

Ken Chappell, director and senior auctioneer at hockingstuart Mooroolbark, in Melbourne, says the hard work is done in the four weeks leading up to the main event.

“The day is the show, but with no buyer, the show is not as good. The listing agent needs to make sure the campaign is copy book, and auction day is going to be representative of the market,” Mr Chappell says.

“Have a clear understanding of your client’s expectations, keep accessing the value of the property in this changing market, ensure the quote price is correct, make sure the appropriate numbers are attending the open for inspections (OFIs), follow up buyers and try to establish their spending limits and whether this is in line with the vendor’s likely reserve.”

Good auctioneers will always have a pre-auction meeting with the vendors, usually 48 hours before the day. In a meeting that typically takes 30 minutes, Mr Chappell runs through the ‘what ifs’ with the vendor.

On the day, auctioneers cover some mandatory items of information and this can vary from state to state.

“They don’t have to go into great depths,” says Brett Roenfeldt, business development manager at LJ Hooker International and a judge at this year’s Australasian Real Estate Institutes’ Auctioneering Championships.

“There are some key components they would need to touch on,” says the man who has led more than 12,000 auctions. “Things like: the property is offered subject to reserve price; that there is no cooling off period; that it’s a cash, unconditional contract.”

They would also need to point out how many vendor bids they can use, which again varies from state to state.

Jason Andrew, winner of the 2010 Australasian Real Estate Institutes’ Auctioneering Championship, says it’s important the auctioneer doesn’t make the terms and conditions and contract too hard and legally-focused.

“People are looking for every excuse and every reason why they shouldn’t bid,” says the director of a self-named freelance auctioneering house in Queensland.

“You’ve got to be using language like, ‘This contract is clear and concise, it should only encourage you into the bidding’. If you use words like that...they’re just small touches that sink into a buyer who then thinks, ‘I like this, I’m feeling more comfortable.’”

Auctioneers need to remember that once the formalities are out of the way, people are there to see the bidding, says James Wardrop, franchise and training manager at Victoria-based Stockdale & Leggo.

“Many auctioneers talk for too long and don’t get to the point,” he says, adding that while it’s good to put on a bit of a show for the neighbours and other potential vendors, it’s important not to waffle.

Ray White NSW’s chief auctioneer, Sam Kelso, agrees. “To be honest, I don’t think the consumer cares about the auctioneer. They’re just there to buy,” he says. “I don’t think the consumer ever thinks, ‘I wonder who the auctioneer is on Saturday’.

“If I’m a buyer, I don’t want them to talk for 20 minutes about the property, and how good the agent is. So my call is all around the numbers, and I’m short, I’m sharp and I’m direct in my introduction.”

His approach is one honed from the 4,000 auctions he has conducted.

But that’s not to say there isn’t room for a sales pitch.

“What we’re looking for here is an emotive property description – there’s a fair amount of points allocated for that,” says Mr Roenfeldt. “They’ve got to sell the sizzle, not just tell them there are four bedrooms and an in-ground pool.

“We’re not looking for a long-winded description. One and a half to two minutes maximum is all that’s required – but it’s got to be a sensational one and half to two minutes.”

GOING TWICE

The bids are now coming in, and multiplying.

$10,000 here, $5,000 there. Another $10,000 to the woman in the middle. Quickly followed by $10,000 from the gentleman hiding behind the lights up the back of the room. Add another $2,500 to the man on the left. Rapid fire amounts have the three million dollar-plus value property surging.

The auctioneers move through the bids, some struggling to work out or recall the most recent total bid amount.

An interruption. Police enter the arena in search for a person of interest. Their presence scares off one of the bidders, ironically the person with the most recent bid. Questions from other bidders follow, and a dispute ensues.

The police leave, the bidder returns, and the bids restart.

A subtle raising of the hand by one bidder, adeptly spotted by most of the auctioneers, has the price now rising by $500 increments. Add a further $500, and then $1,000. The pace is slowing.

Ladies and gentlemen, it’s time for another vendor bid.

MANAGING THE AUCTION

Managing bidding increments is one of the most important criteria in auctioneering, not just at competitions but on any auction day.

Mr Roenfeldt says 200 of the 500 points that can be won or lost at an auctioneering competition relate to how bids are handled.

“What we’re looking at there is the commencement of the bidding, how they actually start the bidding,” he says. “We also look at the use of the vendor bid, where they place it.

“Handling the bidding, the flow of the bidding, the engagement with the bidders, the encouragement to bid, [we look at] all those sorts of things.”

Mr Chappell, one of the senior auction trainers at hockingstuart, says this is the area where most novice auctioneers fall down.

“[Novices] cannot add up the numbers and get off track with the bidding.

“Some get intimidated by buyers trying to break the bidding down or asking questions that they are not prepared for...[This] lack of control, smart buyers sense it and bid to capitalize on it.”

Even the experienced Mr Andrew admits it’s tough keeping track of bids. But he has a strategy which he believes helps deal with rapid bid increases, particularly for high-dollar properties.

“Particularly in the million-dollar range, you’ve got to drop the first two figures,” he says.

“[At the Auctioneering Championship] you saw it was $3,305,000 – try to say that 10 times quickly.

“Just drop the threes,” he advises. “The bid is at $5,000, and another five makes me 10. I’ll revisit the $3,300,000, trust me, I’m not going to forget that. I’ll throw that on top shortly.

“The more simplistic you can make the calculations, the better.

“Another thing I’ll say is that most auctioneers will call for the bid they’re going for. For example, $3,310,000 is the winning bid and I’m looking for $3,315,000, and, particularly for beginners, what their head automatically says is $3,315,000.

“That’s actually the bid that they’re calling for instead of the number they’re at. All of a sudden they think they’re at $3,315,000.

“I always say don’t call for the figure, actually nominate the rise, so I’m looking for $5,000 on top of $3,310,000.”

According to Mr Chappell, superior auctioneers excel because of one trait – they know their numbers.

“In this market, I’ll take a lower increment to keep the bidding [flowing], but if you have a $650,000 reserve and you are at $600,000 with the bidding and calling for $10,000 rises, and you are then offered $2,000, you need to stand your ground or use the vendor bid to move things along.

“If I was at $630,000 in the same scenario and got a $2,000 bid instead of $5,000, I’d ask the bidder to go with me for $5,000. If they don’t, take the $2,000 and ask to be rounded off to $640,000.

“That is the great skill of a good auctioneer and the biggest difference between the good and the ordinary. The good make very good judgment calls most of the time.

“It’s also a skill to knock back a genuine bid and not offend or be confrontational to the bidder. There are many filler lines, as we call them, to use when this situation occurs.”

When it comes to managing bid increases, Mr Kelso believes an advantage auctioneers have in areas where bidders must register – NSW, for example – is that they know exactly how many bidders are present. This can influence the size of the bids they’ll accept.

“If you’ve got 10 registered bidders and someone wants to break you into $10,000 bids a little bit early, well, you say yes because you know you’ve got nine other bidders there to support that,” he says.

“If you’ve only got one or two bidders, you might say no and try and push them to bid to $25,000 or $50,000.”

PLACING VENDOR BIDS

Just where vendor bids are placed is another criterion watched carefully by judges.

Mr Chappell says the vendor bid is used to move the bidding toward the vendor’s expectation.

“It can be used effectively if there is a lull in the bidding, as a link to keep things moving. Most auctioneers would use a maximum of two vendor bids, but that’s at an auctioneer’s discretion,” he says.

Mr Roenfeldt says that in states where you have more than one vendor bid, it’ll often be used at the start. Alternatively, for those areas with only one vendor bid, they’ll generally leave it until late in the auction.

“In the real world, strategically it has got to be used just underneath the bottom end of the selling range.”

The vendor bid amount shouldn’t be within 10 per cent of the reserve price, he says. “What you don’t want to do with the vendor bid is scare off any potential bidders that may want to negotiate immediately after the auction.

“You would traditionally be conservative about where you place the vendor bid.”

GOING THREE TIMES...

Some agitation creeps into the auction. The bidder who fled the police isn’t being overly clear with his bids, while another wants the auction paused until his mobile phone reception improves so he can hear his colleague’s offers.

And a woman is now questioning where the bid is at. Again.

Most of the auctioneers take it in their stride. A patient smile envelopes their face. They can wait, even if the competition is being run with strict time restraints. Some light humour follows, along with some encouraging words to get the bidders back on track.

One auctioneer takes a different tack. His demeanour changes as he curtly chastises the bidders in question for wasting time.

The bids stutter momentarily. But they’re soon back on track as the property edges past the reserve – ‘We’re now on market, ladies and gentlemen. We’re playing for keeps now’.

HUMOUR ME

Humour can be an important part of the auctioneering process.

Andrew North of Cooper & Co Real Estate, Harcourts New Zealand,  believes humour, used correctly, can help drive up the selling price.

“From my perspective, when people smile and enjoy the process they pay more money,” the 2011 Australasian Real Estate Institutes’ Auctioneering Championship runner up says.

“From a vendor’s perspective, if you’ve got an auctioneer who can make people act in that way, it’s in their best interest.”

Real Estate Institute of Australia (REIA) acting president Pamela Bennett says humour can keep people engaged.

“You have to be measured in it. You can’t use it too much because it’s a very serious process as well,” she says.

“It’s enough to lighten the process to make people feel comfortable without becoming flippant. An experienced auctioneer will know how to temper that with the audience.”

Mr Kelso is also quick to point out that he’s not a comedian. “I think you’ve just got to feel the crowd,” he says. “I’ve got stock, standard lines that every auctioneer has. It’s just what feels comfortable. I try not to joke too much, I just try and show the utmost respect.

“I don’t think people are there for a laugh. If you can make them laugh, great, and that’s an added bonus.

“I see auctioneers that put too much emphasis on humour, but my job is to sell the property for the seller.”

Mr Chappell concurs: “One of my pet dislikes is new auctioneers using smart, cringe-worthy one-liners, instead of concentrating on getting the numbers right.”

There’s nothing worse than a deadpan auctioneer for 2011 REIA Australian Residential Salesperson of the Year, Tim Heavyside of Victoria-based Fletchers Real Estate.

“Confidence and enthusiasm are critical,” he says. “Your personality can draw a crowd, even if they are not buying, who can get caught up in the whole process.

“Humour - the right type - attracts attention and diffuses what could otherwise be a tense time for bidders.  If people don’t like your personality and feel intimidated, there is a possibility they will hold back on bidding.

“You need to keep in mind that the bidders are feeling very nervous, too,” he says.

Mr Andrew believes the style of auctioneers has changed dramatically in the past few decades. According to the 26 year-old, the days of the dictatorial auctioneer are long gone.

“Today’s auctioneer needs to have a few different traits,” the veteran of more than 4,000 auctions says. “I think the traits are humanising, engaging, likeable and the style that I think is winning out in the current market is conversational.

“It’s gone from being a dictatorial style to now being much warmer – bringing people aboard.

“People are looking for every reason why they shouldn’t bid at the moment. If you’re standing up the front and if you’re very aggressive and dictatorial, you’re not going to get people on side and they’re just going to leave their hands in their pockets.”

All done – are you out, sir? Madam?

Are you SURE? Certain? Nothing more from you, sir? And you, madam, are you all spent? It’s all done then at the fall of the hammer...going, going, going... GONE!

We’re SOLD!

FINAL FLOURISH

Brett Roenfeldt says it’s important not to rush the fall of the hammer.

“You don’t want to do your three calls too quickly because you’re still trying to look at how you extract bids from the audience,” he cautions. “[The judges are] looking at, ‘Did the auctioneer come back, does he try and entice more money from the underbidders before hitting it done?’”

It’s important to give buyers some time to think, but he’s still seeking plenty of passion and energy in the final flurry of auctioneering.

“Short, sharp and very powerful,” is how Mr Roenfeldt describes a good finish.

A thank you to the bidders and successful purchaser, along with a short promotion of the agent, is also par for the course at this stage of the proceedings.

And that’s how it ended at the Australasian Real Estate Institutes’ Auctioneering Championship.

promoted stories

REB Events