In our area of the inner west and inner-city Sydney, properties are overwhelmingly sold by auction.
Buyers and sellers are all accustomed to this sales method and how it works: a typical four-week campaign of advertising and open homes which culminates in auction day.
But what happens if the property runs the full campaign and doesn’t actually sell? We explore the next steps.
Auctions: the reality
We’ve all been to an auction where the crowd builds, the buyers register, the auctioneer works their magic and the seller gets ready to pop the champagne cork.
And then the property fails to get a single bid.
It’s natural for the seller to feel disappointed, to assume that all the advertising and marketing has come to nothing and that the campaign has failed. But that’s not necessarily true.
The reality is that not all properties sell at auction and that’s often not a problem. For example, if you analyse the auction clearance rate in Sydney for the week ending 31 October 2020, 55 properties were passed in out of a total of 768 auctions.
Why don’t properties sell at auction?
Usually, we find properties are passed in for one or more of four reasons.
1. Many buyers feel nervous bidding in front of the public and would prefer to negotiate behind closed doors. Quite often these same buyers will happily negotiate with us directly after an auction and we often sell the very same day. If these buyers were registered bidders at the auction then the auction conditions still apply and it is still an ‘unconditional contract’. In other words, there is no cooling-off period.
2. Another common reason properties fail to sell at auction is because people interested in buying have not registered to bid. Often these buyers haven’t been able to get finance in time, haven’t sold their own home or have only recently seen the property but in the coming days or weeks, they’ll be in a strong position to purchase.
3. A third reason properties are passed in is that buyers are simply being strategic. They don’t want to put their best and final offer out there in the public domain unless they really have to. Instead, they want to play their cards close to their chest. Although they’re willing to buy, they’re also usually hoping for a bargain once the property is passed in.
4. A final reason is that sometimes the vendor has unrealistic price expectations. If the reserve is set too high, or if the seller receives no bids higher than their own vendor bid, it pays to rethink the price guide. In these situations, the seller often has to be willing and open to meet the market and negotiate.
Why go to auction at all if properties are regularly passed in?
Auction is still one of the most effective ways to sell property. This is particularly true in a competitive market like Sydney’s inner city and inner west, where there are currently many more buyers than sellers thanks to the uncertainty around COVID-19.
Auctions offer the opportunity for a short, sharp four-week marketing campaign, and the auction brings the interest to a head.
That campaign is also rarely wasted. Even if the property is passed in at auction, it rarely takes more than a fortnight to sell after the auction, which is still a relatively quick sale.
What can you do if a property is passed in and doesn’t sell at auction?
If you’re buying, a property passing in opens the door on the opportunity to negotiate privately. While many sellers are less open to pre-auction offers, most are willing to consider genuine offers after the auction.
If you intend to go down this path you should always still register to bid. After all, the seller must first negotiate with the highest bidder on auction day before they speak to others.
For sellers, there are other considerations.
Sellers also need to be willing to negotiate. They must also have realistic expectations about price. This does not necessarily mean they have to be prepared to discount heavily. However, it does mean they should listen to the advice and guidance of their agent when it comes to listing the property with a sale price that reflects market feedback.
They should also be patient - sometimes the property may take a while to sell but it’s important not to become too despondent or impulsive.
More than anything, when property passes in at auction, the real estate agent carries a great responsibility and needs to do what they can to earn the sale. They must have solid negotiation skills and the ability to get buyers to put their best foot forward. They should also be proactive with any follow up marketing efforts. This could mean, for instance, directly calling their contacts or investing more in digital marketing, such as a targeted social media campaign.
That’s why it’s always important to choose a real estate agent with the experience to guide you through the process and get the best price for your property.
Other ways we sell property
Auction is just one way we routinely sell property in Sydney’s inner city.
COVID-19 restrictions in 2020 meant that for a while, auctions had to go online or we needed to find alternative ways to sell people’s homes.
So in 2020, we saw many other sales methods used including traditional private treaty sales, off-market sales, and expressions of interest.
The truth is there is no one size fits all approach to selling property. Different methods suit different properties, sellers, buyers or economic conditions.
A good real estate agent will advise you on the best approach for your property and circumstances.
Contact our team today to find out more about how we can help you buy and sell in Sydney’s inner city and inner west.