Auctions benefit who? Seller or Buyer or Agent ?

A True Story

In late 2021 the post covid market in Christchurch was still pretty strong, lots of buyers and prices still reaching good heights.

I was asked by a good friend to help her bid for her son at an onsite auction here in Christchurch, they were stuck in Auckland in the long lockdown up there.

They were moving back to Christchurch and wanted to buy their first home here as Auckland had been cost prohibitive for them. They found a delightful character home in a good area near the river and family and went about getting pre-approved to bid at auction. This requires buyers to get all legal items checked and of course mortgages pre-approved and LIM and Insurance all in place, should they be the successful bidders.

The day came and I attended as promised to help them bid, they were on the phone in Auckland and my friend his mother and I were at the property being sold.

We had discussed some strategy for the bidding and covered several scenarios but as it happened there was strong early bidding by 5 groups of buyers, I’m going to make up the dollar amounts here, but they directly align with the actual amounts in question for the purpose of this true story.

My friends told me they were pre-approved to bid or offer up to $750,000. So, although they would like to get it for less, we were going to continue to bid until their maximum.

The bidding started low at 400k and several hands went up but before very long the early bidders dropped out and what was left was us and one other couple and we continued to bid against each other , then at $650,000 the auctioneer declared the property had reached the owners reserve and was now on the market ( the owners I had noticed were actually standing near us and looked super please d that bidding had gone over their expectations, naturally you would.!

Bidding slowed to smaller amounts but continued all the way to $697,000. This now appeared to be $47,000 over the seller’s reserve (a reserve is never actually disclosed so we can’t be sure, but it was called to be on the market like I said at 650k) they must have been so thrilled!

At this point we had been down to 1,000-dollar bids and my buyers were successful at the 697K bid and the hammer fell, and they had purchased. Lots of clapping the estate agent and auctioneer and the owners seemed ecstatic.

What’s is wrong with this seemingly hugely successful sale for the sellers?

I asked my friends, had it been a Deadline sale or Tender, what would they have offered? straight away without hesitation they told me they would have paid the preapproved maximum of $750,000.

So, the moral? those sellers missed out on $53,000 plus they would have paid the agent on their sale price a commission of approximately $27,240.00 plus marketing plus auctioneers fee

Had they run a deadline sale they would have been at least 50k better off, had they run their deadline sale through The Property Coach they would have been $77,000 better off.

When I told the Auctioneer that my friends would have offered the 750,000 at a deadline, he simply brushed it off saying oh they would have paid too much!

Funny, isn’t it? agents and auctioneers are employed by the seller to get the best price possible in any market, is it up to your agent whom you are paying thousands of dollars to represent you and your usually most valuable asset to decide what’s too much?

So, in closing those agents would have been paid that next week because the sale was unconditional, fast, done move onto the next one.

Don’t be a seller, like these people, who never knew what they missed out on, let all buyers in and let them compete blindly because you never know when the premium price contract is about to land on your desk.

If you have a story share it in the comments.