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When it comes to selling, this seasoned auctioneer has learned a lot from his rural lifestyle and the farmers that have informed his worldview.
Jesse Davidson opined on a recent episode of REB Business Empowerment Showcase, to be sold a lot like an apple: do it quickly and don’t let it spoil.
The chief auctioneer and director of auctionWORKS believes his upbringing in the farming industry has proved instrumental in deepening his comprehension of the mechanics behind auctions.
“The benefit of an auction program, particularly with the rural agent, they seem to have a good understanding as to why we auction.
“The old adage of, if you’ve got a box of apples that we’re selling at a particular day in a country market, they have to sell on that day. Because if they don’t, they begin to spoil over time,” he explained.
While it seems unconventional, Mr Davidson said the same selling technique applies to property as well.
“[If] you don’t sell a property on auction day, the longer that property stays on the market, the more it starts to get a bit of a stench attached to it, if that makes sense.
“That’s why we try to get properties on and off the market as rapidly as we can, and that’s what auction offers,” he stated.
However, it’s not solely getting a property sold at the fastest time possible. As emphasised by Mr Davidson, a successful auction also hinges on accurately determining and meeting the reserve price.
Given a unique opportunity to be as involved or little involved as agents desire in reserve price setting meetings throughout his career, Mr Davidson says he now has a wealth of experience and insight into different approaches and potential mistakes.
One of the biggest mistakes he said he has often seen is the selling party trying to set the reserve price an hour leading up to an action or even on the morning of an auction.
“My advice has always been to set it one, but if you can, two days prior to auction,” he stated.
He explained setting the reserve price last minute opens up the potential for the owner to mislead the auctioneer about their desired price, resulting in a reserve that differs significantly from expectations.
“[If] the reserve price comes in too high that you’ve got two days to potentially bring that reserve price down to a more reasonable level. But if it is low, you can start to rekindle some interest and get some buyers back on deck with that as well,” he added.
Mr Davidson added reserve prices “can and should differ depending on your circumstance”.
He underlined the importance of balancing the seller’s desire for a high reserve price with the agent’s responsibility to secure the best possible price on auction day.
“Typically, agents will say that, ‘I want my reserve price. I’ve been guiding 900, I want my reserve price at 950.’
“That’s great. But we are and do have a responsibility, and I make no apologies for this, that when I’m employed by my owner, my job is to get them the best possible price on auction day,” he said.
But while agents often aim to meet the seller’s reserve price expectations, he suggests that setting the reserve slightly higher than expected could be advantageous if there are limited registered bidders.
“If for whatever [other] reason we have won registered bidders, there may be a little bit of merit in setting that reserve price slightly higher than expectation, to try and get to that level.
He said this strategy allows room for negotiation, as buyers tend to aim for a middle ground between their offer and the reserve price.
“Because in every negotiation, we know that if someone comes over to you and you are at 800 and they show you a reserve of 900, you’re never going to pay 900,000. You’re going to try and meet in the middle at 850. You might come to 825, you might even come to 870. But the number of 9, which is the end goal of the vendor, is sometimes then not achievable, if that makes sense,” he said.
By aiming higher initially, the agent increases the likelihood of achieving the seller’s ultimate goal, which may not be reachable if the reserve is set too low.
“So, really understand that you adjust your reserves as per your circumstances. If you’ve got a lot of interested parties, there’s a lot to say that having it at a really conservative level to try and push the momentum is also a massive benefit there too,” he said.
Listen to the full conversation with Jesse Davidson here.
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