Pricing a home for sale is a delicate balancing act. List it too high and you’ll scare off potential buyers; too low and you’ll risk underquoting.
Home owners who are prepared to meet the market have the best chance of selling their home on auction day, while those who hold out for a higher price risk having the property sit on the market.
But if you find that sweet spot, your home will sell well, and you’ll be able to move on to your next property venture.
Understand the market
A conservative price guide is your smartest option. Photo: Peter Rae
A conservative approach to pricing will yield the best result in the current market, especially for motivated vendors, says Pilcher Residential director Simon Pilcher.
“If people are on the move, particularly upsizing, this is the best opportunity I’ve seen in a number of years,” he says. “If someone is motivated to sell, they just need to price the property well, listen to what the market is saying and play accordingly.”
Agents should constantly communicate market expectations to vendorsSimon Pilcher, Pilcher Residential
Vendors should be wary of agents promising overly ambitious results to secure a listing, Pilcher says. “This is the worst time to be swayed by an over-enthusiastic agent.”
Agents will need to keep vendors’ expectations realistic. Photo: Peter Rae
Agents should constantly communicate market expectations to vendors, as home owners with unrealistic price expectations face the prospect of a drawn-out campaign, according to Richard Matthews Real Estate director Richard Baini.
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“The vendor and agent need to be very open and up-front from the beginning and be very, very clear on price,” he says. “If you don’t get it right by auction day, the property will go stale and will sit on the market for a long time.
“If we’re guiding the property at a certain price point and you’re not getting much inquiry, you need to have that conversation right away, not just see how it goes for a week. A week is 25 per cent of your auction campaign.”
Falling clearance rates don’t necessarily indicate that a property has a lower chance of selling. Photo: Peter Rae
An auction campaign creates a sense of urgency and transparency, and allows the property to be sold before, during or after the auction.
Falling clearance rates don’t necessarily indicate that a property has a lower chance of selling. Even when a property passes in, the feedback from the market is an invaluable tool for post-auction negotiation.
“The purpose of an auction is to really determine the true market value,” Baini says. “The ultimate sign of that is that banks do generally value a property at purchase price when it’s bought at auction.”
Auctions tend to pick up pace when buyers realise a property is about to sell. Photo: Peter Rae
Auctions thrive on momentum, and may see renewed bidding when buyers realise that a property is about to sell.
Baini explains: “As an auctioneer, the most powerful words we can say is, ‘We’re on the market and we’re selling today’. It doesn’t guarantee you another bid but it certainly brings out of the woodwork the people that do intend to bid.”
A low reserve isn’t a guaranteed way to ensure a property sells well, however. “If you call it on the market, you need to be prepared to sell the property for the very price you’re calling it at,” he adds.
When to go private
For some properties, auction is not the most effective method. Photo: Supplied
Passing-in a property shouldn’t be considered a failure, and in many cases is the most effective way to secure the highest price.
“I don’t really mind whether it sells before, during or after auction,” Pilcher says. “It’s the agent’s job to maximise the price, not see the hammer fall.”
The decision to negotiate privately is easier if the agent has communicated effectively with buyers and understands their position. “If you feel as though there’s a little bit of movement but some people are nervous, you don’t want drag the auction out needlessly,” Baini says.
A clear line of communication between vendors and bidders is crucial in negotiations. Photo: Supplied
The key to a successful post-auction negotiation is transparency, he said, telling bidders what the reserve price is and letting them know the vendor is expecting offers close to that price.
“If we pass it in, we negotiate with the highest bidder, and if we come to an agreement with that highest bidder, the property sells.”