What is the most a buyer is prepared to pay?
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Loading... - Nicole Davis
- 31 May 2022
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With all the talk about how public auctions are failing sellers so badly it is no wonder that homeowners are wary of auctioning their property. Indeed, with a 100% auction failure rate in the local area last week it is no wonder that most sellers and their agents should be considering other ways to sell.
But what if there was another way to auction that can remove the stress of selling AND get a better price for your property in any market?
Most sellers want to achieve the highest possible price and therefore one thing they should never do is let interested buyers know the level at which other offers have been made. So, they need to use the method known as Silent Auction.
What is a Silent Auction?
Simply put, silent auctions are where buyers place their best offer on a property without publicly divulging that information.
A Silent Auction is a bidding process whereby the negotiations are undertaken by the agent and the buyer without any disclosure of any competing offers to other buyers that are bidding on the property. This raises the likelihood that buyers will then offer their maximum amount.
Why not just do a traditional auction?
Traditional auctions are stressful and do not work in the seller’s best interest. Fewer buyers can buy at public auction, which decreases the competition and the final sale price. Despite what many agents say, public auctions do not always sell or sell well.
For a public auction to be successful it requires two or more bidders on the day. The auction agent will allege that an auction will generate competition between buyers and push the price up. This is true to a point. The public nature of the traditional auction process dictates that bidding will be comparative, that is, bidders will only bid a little more than what they must, in order to secure the property. Therefore, the property is not being sold at the highest price that the winning buyer is willing to pay.
Every week across New Zealand people sell their homes through public auction for less than the buyer was prepared to pay for it. As has been said, “Silent pain for the seller and silent gain for the buyer”.
What are the benefits then for going silent?
The real benefit is from the seller’s perspective. To get the highest price for your property, it is wise not to divulge what offers you have already received to any other interested parties. All negotiation experts advise this.
As an example, in a previous Silent Auction sale, consider two competing bids, one, the underbidder, at $1,165,000 and the winning bid of $1,230,000. In a public auction, where both bids would have been public, the property would be most likely to have been sold at just $1,166,000 as bids would have slowed down to say $1000 increments. It would have been impossible to achieve $1,230,000 by using the public auction system. Why would a buyer offer more at a public auction when they could see what their competitors offered? Instead, in the truly competitive environment created by a Silent Auction, rather than the mere comparative nature of a public auction, buyers have to put their best foot forward and place the highest bid they can to pay for the property. Read More…
