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Clearance rates are dropping, but that doesn’t mean that going to auction shouldn’t be part of your strategy for netting a property’s best price.
Speaking on a recent episode of Real Estate Exposed with Phil Tarrant, Tom Panos shared his perspective on what auction numbers are telling us in this moment of change.
“One thing that’s really clear is that the amount of properties that were selling at auction has now shifted to selling after auction. I actually think if we change the clearance rate to being on the seventh day after the auction, you’ll find there’s no clearance rate change. It’s exactly the same,” the Real Estate Gym founder opined.
Pressed as to whether that seventh-day sale comes as a result of the auction being held, Mr Panos said he believed that hosting an on-street sale, whether the property cleared on the day or not, was certainly a good strategy for ultimately achieving a desirable result.
“I think if you’re a vendor and if you’re an agent, [going to auction] is a very smart and a very effective way for the following reasons. Number one is that it basically says to the whole market, ‘by this date, I’m making a decision. I’m not coming to the market to win the lottery and sit there for two, three, five, seven months. I’m actually making a decision 30 days from today’. That’s [the] first plus,” Mr Panos said.
In his eyes, the second advantage to auctions in the current climate is that it helps eliminate wavering on the part of prospective buyers. It’s a strategy he said helps eliminate the “emergence of Bob the butcher, who doubles up as a real estate expert”.
Mr Panos explained: “So when you sell a property as a private for sale, let’s assume that you come and buy a property through me. I’m an agent. We agree on a price of $800,000. Before you actually put the 10 per cent deposit down, you normally go off and do your due diligence. You speak to your lawyer, you’re doing your pest and your building inspection. So there’s a period normally of about five to seven days where you are out there, making sure everything’s right before you become unconditional.
“It’s this unconditional period that has become extremely risky for the real estate industry because what happens is all the friends and family members start giving advice to the buyer and saying, ‘Oh, haven’t you heard what’s going on? Property prices are dropping. We’re hitting recession. Rates are going to hit 6 per cent.’ So they scare the buyer. And what happens is the sale falls through.”
Mr Panos said that some agents are going through this process two or three times on a given property, forcing them to repeat the sales process again and again at a time when time is of the essence and their resources are already stretched.
“With auctions, that doesn’t happen. When the hammer drops, it’s done, it’s dusted … There is no chance of that property falling through,” he said.
Finally, Mr Panos said that even when a property fails to clear, the chance to identify your serious bidders can be invaluable in ultimately making the sale.
“The research is clear; about half of properties that go by auction, sell in half the days on market than private treaties. And that’s because a lot of the properties identify a buyer during the auction. And even if they don’t sell at auction, they’re selling shortly after auction.
“The buyer is identified because you’ve got this compressed period. The best way to describe it is, instead of doing a three-year university degree, you’re doing a four-week high [intensity] program at Harvard University where you are all in, working all hours, because you know, by this day you want to get to graduation. That is what an auction is,” Mr Panos said.
Auctions, the duo concluded, are alive and well, as long as you’ve got the right perspective on their strategic role.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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