SILENT AUCTION - HOW IT DELIVERS THE HIGHEST SELLING PRICE
SILENT AUCTION ON RESIDENTIAL REAL ESTATE.
HOW IT DELIVERS THE HIGHEST SELLING PRICE.
Have you ever watched a poker player play his or her game? They play with their cards held close; hidden from other players. If they were to expose their cards, it would make it far too easy for their competitors. While selling a home is serious business the concept of disclosing bids correlates to a poker game.
As a seller, the best thing to do is to ensure that interested parties don’t disclose to one another what they are bidding on your home. Why? When buyers’ offers are disclosed to one another at a public auction they are focused on outbidding each other with slightly higher bids, rather than offering the highest price they are each willing and able to pay to purchase the property.
At a public auction, lining interested parties up and then shouting at them with a pointed hammer, results in a series of $500 or $1000 bids to close out the sale. But what if the final bidder had been prepared to pay another $50,000 or even $100,000 more? They don’t have to because they have secured the sale at perhaps $1000 more than the second last bidder.
What this means for the seller is that they have sold for potentially $50,000 to $100,000 less than they could have sold for, had they not sold at a public auction.
Bidding at a public auction is not as competitive as we would be led to believe – it is comparative. If a bid of $1,000,000 is made at an auction, the next bid will likely be $1,005,000, or $1,010,000. It won't be $1,100,000. Each buyer listens to each competitor's bid so that they can bid at comparative levels.
The public auction campaign also sets a deadline with an auction day. Agents will tell you this creates pressure on the buyers to purchase the property but it also puts pressure on the seller to ‘meet the market’ on the day. As a seller, you’ll set your reserve price, the minimum you would sell for. The property will likely sell once the reserve price is reached. You’ll also feel pressured to avoid the public failure of not having the property sell on auction day and will likely feel relieved that your reserve has been reached and a sale is achieved. However, have you received the highest possible price for your property?
A Balwyn North home owner sells their property for $2,440,000 at auction. On the day, the reserve is set at $2,300,000 and due to three interested buyers bidding against each other the property sells for $140,000 above the reserve. It is considered a phenomenal result. What isn’t known at the time is that the purchaser was prepared to pay $2,700,000 to secure the property. This scenario leads us to ask what the agent’s focus should be. Is it to reach the reserve, the vendor’s minimum and sell or is it to negotiate the highest each buyer is prepared to pay for the property?
In a silent auction, interested buyers place their best, highest and final offers in sealed envelopes, based on their desire for the property and their budgets. The owner sells the property to the party with the highest bid. What hasn’t happened is that potential buyers have placed offers based on what other bidders are offering and then secured the sale with a slightly higher bid.
A public auction can and sometimes does achieve an impressively high selling price while a silent auction, conducted by a skilled negotiator as your agent, will always achieve the highest possible price from the best buyer.
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