Selling at auction in NZ: what you need to know
You’re thinking of bringing your property to auction, but you’re not sure what to expect. Don’t worry, heaps of Kiwis have had exactly the same thought processes –you’re far from alone.
Despite the fact that auction is one of the most popular ways to sell a property in New Zealand, there’s no denying that such environments are fast-paced, and more than a little bewildering to those whot haven’t experienced them before.
To help you get psyched up and prepared, we’ve put together this guide on selling at auction in NZ, so you know what to expect, and why this is a preferred method of selling for so many Kiwis.
Selling at auction: how to prepare
As a seller, there’s a cost of selling a house at auction – the auctioneer’s fee. The exact amount will vary between different real estate agencies, but the amount can be in excess of $800. This information should be outlined in your agency agreement forms, so read it carefully, and ask questions, if you think you’re likely to choose this sales method.
In the days leading up to the auction, you should be in regular contact with your agent, especially if you’re open to pre-auction offers. If you receive a pre-auction offer, and are happy with it, this will bring the auction date forward, and your agent should be on the phone to all the interested buyers trying to drum up some excitement and urgency ahead of the big day.
You’ll also need to confer with your estate agent on setting your reserve price – the minimum amount you’d accept as a bid from a potential buyer. This will be kept confidential between you, your agent and the auctioneer, until someone bids at or above that amount on auction day. If you do receive an acceptable pre-auction offer, that offer will become the new reserve price.
You'll need to confer with your real estate agent about setting a reserve price for the auction.
This is also the time to ensure your marketing efforts are all running smoothly. Again, your agent should be taking the lead on this, making sure the word is out and your Trade Me Property ad, and other marketing materials are depicting the property in its best possible light.
If you’re particularly nervous about what auction day might bring, there’s nothing stopping you from attending auctions of other properties to see how the process works first hand, and hopefully answer any questions you have.
Do I need to attend my property auction?
If at all possible, yes we’d highly recommend attending your property’s auction. While the auctioneer and your estate agent (who might be the same person) will be running the show, it’s always best to be on hand in case any last minute questions crop up.
For example, some buyers might want to know if there’s any wiggle room on things like settlement dates.
More importantly, you’ll need to make a call on what happens next if your property doesn’t reach its reserve price. You usually have a few options if this happens:
- You might be able to lower your reserve, and the property will sell to the highest bidder who bids at or above this amount.
- You could have the option to take the highest bidder to a private room and try to negotiate a higher bid. If you’re successful, this bid becomes the new reserve, and the auction will resume.
- Your home could be passed in, meaning it hasn’t sold at auction.
If any of the above happens, it’ll be certainly easier to discuss your options with your real estate team if you’re on the ground.
The advantages of selling your property at auction
If you’re thinking to yourself “I’m not sure if I should be selling my house at auction”, here are a few reasons why it’s proven to be popular among Kiwi home sellers:
- Buyers are thinking about the maximum they can afford: especially in seller’s markets, buyers come to auctions thinking about the most they can afford to pay, rather than how low they can negotiate the asking price.
- Buyers are generally unconditional: this is highly valuable, and save weeks of wrangling and rushing to meet conditions.
- They don’t know your reserve: unlike asking price sales, where big figures can put buyers off, the lack of a fixed price is likely to increase your potential buyer pool.
- It’s legally binding: after the gavel falls and contracts are exchanged, that buyer is legally committed to going through with the purchase. There’s also no room for the buyer to try to negotiate a better price at this stage.
- The chance for a bidding war: especially in strong markets, competitive buyers can push up the final price of your home to a point considerably above than its market value.
- Speed: auctions are generally considered to be one of the quickest to sell a property in New Zealand.
Of course, it’s important to have a full discussion with your real estate agent before deciding which method of sale is right for your home. It’s also worth knowing that agents are legally obliged to tell you if a particular method of sale is going to result in a higher commission for them from their agency (even though it won’t impact how much you pay).
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