19 Aug Passed-in properties sell at a premium – Justin Nickerson
The competition is just as high in the 24 hours after a property has been passed in at auction, as at the auction itself. New research reveals that passed-in properties don’t commonly sell for less than the last bid. Auctioneer of the year Justin Nickerson gives us the insight on this fact.
Kevin: As we have mentioned on a few occasions, an auction campaign is more than just the auction day. There’s the lead up to the auction, and there’s also, more importantly, as we’re now discovering, after auction because there’s some recent research that’s been released by Gavl.com that reveals that passed-in properties are selling quite well. Joining me to talk about this, Justin Nickerson who is a spokesperson for Gavl.
G’day, Justin. Good to have you back on the show.
Justin: Hey. Thanks, Kevin. How are you doing?
Kevin: Yes, good. I guess this is no real surprise to you but it certainly was to me that properties are selling quite well and above their post-auction pass-in price.
Justin: Yes, I think sometimes there is an expectation from buyers in particular that the pass-in price sets the ceiling and then they use that figure to renegotiate it down with the seller. But the reality is that sometimes with auctions, the price that gets passed in is the figure where the cash bidding has stopped. But then as you know, sometimes the auction starts after the auction, and people with terms and conditions can then get involved in negotiation after the auction – and that can quite often drive the price up.
Kevin: I think the research revealed that it was selling for about $42,000 more than post-auction. What number of properties are actually selling after auction?
Justin: That clearance rates hovers a little bit depending on what area you are and what location. But particularly in the South East Queensland corner, it can be as high as almost 30% of properties that sell within 10 to 14 days after the auction. I would suggest in Sydney and Melbourne, that’s probably slightly less than that because their clearance rates inside the first 30 days would be higher, but it would probably still be a substantial amount, probably 15% to 20%.
I think it’s just a reflection that sometimes that auction being a three-stage process is that third stage is the one that it does end up transacting in.
Kevin: Agents, of course, know this. I think the research revealed that only 3% say that properties sell for less after auction, so the evidence is clearly there, Justin, isn’t it?
Justin: Yes, it is definitely. And I think agents are really key in understanding the fact that sometimes the cash interest is there but it’s not a representation of the full market interest and it does need to go to that next stage to try and get a little bit more money for the seller.
Kevin: I think there’s a lesson here for agents, too, and I just might expand on this a little bit. And that is that the agents tend to play up the option of selling on the day of auction. I know there’s still a very high reliance on that happening, but do you think if vendors were aware of the fact that their property may sell for more after auction, they wouldn’t be so disenchanted or disillusioned if it passes in, Justin?
Justin: Yes, potentially. And I think there are good agents who are out there who really embrace and say “Hey look, it can happen prior to the auction, it can happen on the day, or it can happen post-auction.” And in reality, there are three different stages and opportunities that you have to sell the property.
We, by instinct, tend to really build up that middle stage, auction day being the big deal and end-all and the pinnacle. But the reality is that’s just a step in that three-stage process. So, what we want to be getting across to our sellers is “Look, we do want to try and sell it under the auction conditions if we can because that’s going to give you the best possible terms, which is important. But if that doesn’t happen, then certainly, it’s not all toys out of the cot.
“That third stage, we can look to engage with someone who might need terms and conditions or someone who might have seen the property late or waiting for a bit of a price indication, and then that could be the next stage where we can get it done.”
Kevin: We’re probably seeing that more and more, too, with the introduction of services like Gavl, which is where more and more people are able to be at the auction, albeit virtually. That’s probably opened up the opportunity for more negotiation after auction because they won’t have registered a bid prior to auction, Justin.
Justin: Yes, and also I think the beauty of that Gavl tool also does give a bit more transparency to people who maybe can’t attend the auction or might be post-auction buyers. They can watch the auction and they can get a really good feel for what their next move is going to be strategically to try and get the property after.
Kevin: What’s involved with someone bidding at an auction remotely by using Gavl?
Justin: It’s a really simple process, actually. The registration process is similar to that of the usual registration process. The only difference being they do fill out an authority to bid form or an authority that allows them to bid remotely. And then actually their bids are relayed through the app as if they were a live bidder there on the day, and then that obviously gets relayed to the auctioneer.
They do try and make it as seamless and as easy as possible because they want to make sure that anyone who is looking at bidding remotely isn’t at a disadvantage to anyone who might be sitting inside the lounge room or out in the back garden.
Kevin: Just in terms of a technicality, someone bidding online with Gavl, if they are successful, who actually signs the contract on their behalf? How does that happen?
Justin: Commonly, it’s the auctioneer. In most of the states in Australia, the auctioneer has the authority to sign on behalf of the buyer or the seller as part of the auction terms and conditions. It is a standard allowed process that that can happen. That’s the easiest solution, and generally, the auctioneer will sign on that buyer’s behalf and then the property is deemed to be sold and the transaction heads forward.
Kevin: Does it need to be further endorsed after that? I know that it’s a formed contract at that stage, but are there any technicalities to say that the purchaser at some stage has to sign off?
Justin: No, there isn’t. It gets sent to their solicitor, which is part of the usual process that takes place but it’s deemed when the property actually is sold, so when that final bid and the property is knocked down, that’s actually when the contract is formed. So nothing more is needed beyond that point.
So from the seller’s point of view particularly, they have peace of mind, but also from the buyer’s point of view, peace of mind as well that they bought the property and nothing is going to upset that.
Kevin: Busy weekend ahead for you, mate, is it with auctions?
Justin: It is, yes. We have quite a few on this weekend. We’re pushing towards the spring showing season that everyone looks forward to. And September is going to be a big one as well. We were a little bit quieter through June and July, but certainly, August and September, [6:28 inaudible] and plenty of auctions in front of us.
Kevin: Are you anticipating that the auction activity is going to increase during August running into September?
Justin: Historically, it always does. Historically, September is usually our largest month of volume for the year. I don’t see any reason that it’s going to be different this month. And August is a bit of a prelude to that. The vendors who are a little bit clever and try and beat the rest of the competition in the market usually come to the market in August, and then we have the big rush in September.
Kevin: Justin Nickerson, my guest. Justin is the Gavl spokesperson, also a multi-award-winning auctioneer. Justin Nickerson, thank you so much for your time.
Justin: My pleasure, Kevin. Thanks so much.