Auctions versus private treaty: certainty in uncertain times

Auction clearance rates have become one of the more widely reported property statistics over recent times.

But even in the big capital cities auctions account for a small number of sales – 11% of all house sales in Sydney in the 2009 financial year, according to Australian Property Monitors. For units, the proportion was even lower, with auctions accounting for 6% of all unit sales in Sydney in that period.

Canberra is the only other capital city where auctions accounted for more than 5% of all property sales.

But Rob Forde, a Ray White South Australian auctioneer, recommends vendors consider putting their properties to auction despite the slowing conditions of the current market.

“Auction in this market should not be feared – it should be embraced,” Forde says.

“In a market with so many unknowns, auction is one of the few things that provides certainty to buyer and seller alike.

“Especially with above-average listings, it is crucial to not put a price on the property.

“By not putting a price on the property, all buyers have the opportunity to look at the market and see where they think the value lies,” Forde says.

Auction has been producing results in all market and demographics, he suggested.

“I think all types of property should use the auction process in this market to get the best result – a cash unconditional contract with no cooling off, in a short time with a short settlement.

“Still, some vendors are choosing to be on the market for extended periods of time, in a climate where days on market are increasing, and then having to sign a contract with certain conditions, like subject to finance or subject to the sale of another property.

“At a time when days on market are blowing out and getting finance approval is becoming more and more difficult, it’s reaffirming to see the power of the auction process still proving itself.”

He suggested the initial clearance rate figure doesn’t necessarily take into consideration the power of the auction process in engaging buyer offers before the auction date.

He says often the buyer and seller have divergent opinions on the value of a property and the agent is there to find a middle ground.

“People may hold back hoping that they will be able to negotiate with the agent post auction,” Forde says.

“A well-run auction campaign identifies buyers and helps to determine a realistic price in today's market.

“It enables the negotiation process to get started and, most importantly, achieves the best price in the shortest possible time.”