Selling at auction in NZ: what you need to know
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You’re thinking of selling your property by auction, a method of sale that’s particularly popular in cities like Auckland, but you’re not sure what to expect. We’re here to help.
Auction is one of the most popular ways to sell a property in Aotearoa New Zealand – over a quarter sold this way in the hot housing market of 2021 – this easing off in the slower property conditions. Proponents of auctions say they work well in any economic environment, so let’s take a look at the argument for selling by auction in the current market.
The advantages of selling your property at auction
If you’re weighing up various methods of sale, here’s what to think about when it comes to auctions.
- Buyers are thinking about the maximum they can afford: buyers come to auctions thinking about the most they can afford to pay, rather than how low they can negotiate the asking price.
- Buyers’ bids have to be unconditional: this is highly valuable, and saves weeks of wrangling and rushing to meet conditions. If the auction is “passed in,” in other words, the highest bid doesn’t meet your reserve price, buyers can approach afterwards with conditional offers.
- Buyers don’t know your reserve price: unlike asking price sales, where high 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 auctioneer’s gavel falls and contracts are exchanged, the 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: if you have two or more buyers who really want your home, competitive buyers can push up the final price you achieve at auction to a point considerably above its market value.
- Speed: auctions are generally considered to be one of the quickest ways to sell a property in New Zealand. They are held after an intensive market campaign of around three weeks in markets like Auckland. There may be negotiating after the auction if the property has been passed in, but an agreement is usually made within a week or so.
Bonus point: 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).
Selling at auction: how to prepare
If you decide to sell by auction, you’ll pay an auctioneer’s fee which varies between agencies but can be in excess of $800. This information and the agency’s recommended marketing campaign should be outlined in your agency agreement forms, so read it carefully, and ask any questions. In the days leading up to the auction, you should be in regular contact with your agent and you should meet with your auctioneer. If you receive a pre-auction offer you’re happy with, this will bring the auction date forward, and your agent should be on the phone to bring interested buyers together for the new date. Close to the auction date, with a good idea of price from buyer feedback gathered at open homes, you’ll 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.
If you’re nervous of what auction day might bring, it’s a really good idea to attend some auctions at other properties to see how the process works first hand, and hopefully allay any fears you have.
You'll need to confer with your real estate agent about setting a reserve price for the auction.
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 but your agents will be working to keep bidders motivated and negotiating in the hours and days afterwards.
If any of the above happens, it’ll be much easier to discuss your options with your agent if you’re on the ground.
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