Sellers and agents disagree about auction – Justin Nickerson

It’s the decision that has almost all vendors conflicted: whether to sell via auction or private treaty. New research has revealed 90 per cent of real estate agents believe selling under the hammer secures the highest sale price for a property – but just 41 per cent of homeowners agree. Who is right.  We discuss that with Auctioneer of the Year Justin Nickerson.
Kevin:  Interesting that a survey of Sydney and Melbourne real estate agents, which was conducted by Gavl, who we had on the show for you last week – they’re a live real estate auction streaming and bidding technology company; they commissioned the survey – and among those, 100% of agents in Sydney believe that properties get the best result at auction compared to 87% out of Melbourne.
I want to talk to Gavl’s spokesperson on this, Justin Nickerson. Justin is well heeled to be able to talk to us about this. He is the Australasian Auctioneer of the Year, sold more than 5000 properties at auction.
Justin, thanks again for your time.
Justin:  My pleasure, Kevin.
Kevin:  I want to have a talk to you about this, not necessarily supporting the survey, but just highlighting a couple of issues. I was at a function recently amongst a group of prospective sellers who were questioning whether or not they believe in auction because so many buyers will dismiss an auction simply because it doesn’t carry a price range or a price indication, Justin.
Justin:  Yes, that gets raised a lot. We do a lot of training with agents around this, and that’s a real fear in an agent’s mind as well, that vendors or buyers have passed onto them.
We always say to ask the question if that is the case to that person and say “Firstly, are you actually looking at the market right now as a prospective buyer, or are you looking at the market as a seller or potentially a researcher?” because I think you look at it differently.
If you’re a seller or a researcher and it hasn’t got a price, you’re not that engaged in it, so you’re very easy to flip past it. But if a property comes up and it suits your exact wish list, that it has to have four bedrooms, has to have a pool, has to have at least a 600 square meter block, and it’s in the exact location that you want to buy a property, and it comes up without a price, it’s a pretty thick-skinned person who is going to dismiss that just because it has no price.
What most people will do, we believe, is they’ll send an e-mail to the agent saying “Give me a price,” or “Give me a price guide” and then it’s up to the agent to have the skill to be able to transfer that inquiry to give that buyer enough meaningful information that they come through the property.
If they’re really stubborn and say, “We definitely wouldn’t inquire if there’s no price there,” that’s okay because the way that auction works anyway is there is usually three stages to it. There’s pre-auction, there’s on the day, but then there’s post-auction which means if that buyer is still in the marketplace at that time, then the seller is actually going to reach out to that buyer at that point because they’re going to put a price on the property. And that price will be set by the market rather than by the seller and the agent, which is what traditionally happens on the first day of a listing.
Kevin:  With any property, you can only ever sell it once, so in theory, you really only need one buyer. Yet in an auction, to get a premium price, you do need at least two engaged bidders, don’t you?
Justin:  It’s definitely preferable to have two. We always said the two key ingredients to get you the best possible price are an emotional buyer and then placing them in a competitive environment.
I think that private treaty has competition in that it’s perceived competition. If it’s a multiple offer situation, you have to sit down and you have to anticipate what the other person is going to be doing and then you react accordingly.
Auction definitely exists to add competition, but also, auction works with a deadline. So, what you can actually use, even if you have one buyer, is the fact that you have got a looming deadline there that this is the day the seller wants to sell their property and if it doesn’t sell today, then we are opening the door to people post-auction who can come in with terms and conditions.
So, you also have that perceived competition element there even if you just have the one buyer, which is pretty common, actually, at the moment, with a a lot of auctions. Particularly around the South East Queensland market, we get very used to negotiating with one buyer on the day.
Kevin:  A couple of tips from Gavl in the release about giving sellers peace of mind about going to auction. The five points they make are choose an agent with a good track record, choose a realistic reserve price or an expectation, ensure there’s good marketing, ask your agent to invite off-site bidders, and have a strong open home strategy.
I would put to you that with exception of maybe number four – which is off-site bidders – all of those can also be applied to sale by private treaty. You definitely need a marketing budget. Would you agree with that?
Justin:  Yes, absolutely. I think Gavl is spot on in their research and the five tips they’ve put out there because it all ties back to that first one, Kevin. I think if you choose an agent with a really good track record, they’re going to give you enough information so that you can set a realistic reserve price, they’re going to run an equity marketing campaign, and they’re going to have a strong open home strategy.
I think, actually, that first decision that the seller has to make is sometimes a bit of a funny one because sometimes they choose it based upon price or based upon who’s going to do the marketing for free or timing. But really, if you really want to make sure you nail your campaign, you have to choose a strong agent.
We’re an independent auctioning company, so we freelance out, as do Gavl. Being independent, they work with a number of different brands, and we see the difference between agents that do this job really well and agents that just do it to a mediocre level. I think that’s the most critical we’re seeing. If the sellers make that decision correctly in the first place, all those other things fall into line behind it.
Kevin:  Many sellers will tell me that there’s a certain amount of uncertainty with an auction. I think even Gavl pointed out in their release it’s high-risk, high-reward stakes. But also, the fact that there’s a concept that auction costs more to sell, and that’s mainly because auction requires a level of marketing that in some cases, private treaty doesn’t.
Justin:  I’m going to take the contrary view with you here, Kevin. I actually think that auctioning campaigns and private treaty campaigns should cost exactly the same amount of money. I don’t understand why… Your goal in both of them is to get as many people interested as you can and present the property in the best possible light. Why would one method of sale require you to do more? You want both of those things on both private treaty and auction.
Obviously, the difference you get is an auctioneer’s fee and other than getting a charming professional at the top of their game, Kevin, as you and I both know, with the auctioneers, the role they play is that of paid negotiator. So, that’s really where that extra cost should come in.
But outside of that, I actually think that auction campaigns and private treaty campaigns should cost exactly the same, because I think you’re trying to do the same things irrespective of what the method of sale might be.
Kevin:  Week after week, we look at auction results in our weekly program with Dr. Andrew Wilson, which is called The Auction Insider, and week after week, we see the auction numbers in Brisbane, say, compared to Sydney and Melbourne, lagging way, way behind. Is that agent-driven, or is that the fact that people in certain parts of Australia are not comfortable with the auction concept?
Justin:  I think in that Gavl research that you quoted before, it’s interesting that just 17% of Brisbane respondents believe properties sell best at auction. That’s the people who the agents are going in to talk to. So, I think in a lot of cases, what happens is the agent goes in there and they get met with some resistance around auction or “Don’t talk about auction, we’re not interested in auction,” and obviously, the default position for every agent is “I just want to get the listing” because if they don’t get the listing, they don’t get paid, and that’s why everyone does the job that they do.
So, I think that it’s actually driven predominantly by sellers and buyers, and then agents carry that out of an obligation of not wanting to upset them but still wanting to win the business.
I think what you find is the stronger agents or the agents who really believe in what they do, they’ll go in there with a plan and say “I understand you might feel like this, but let’s actually talk about the reasons why you feel like that. Let me try and answer that, and then you can make a balanced decision across both of them rather than based in your fear or you’re not liking auctions out of an isolated particular incident that might have happened 10 or 15 years ago with an agent who isn’t me.”
Kevin:  Yes, it requires a lot of skill and belief from the agent to be able to sell that proposition, which is what you’re talking about. I’ve even seen in some situations in a soft auction market, you’ll find that one office in particular is very strong with auctions. I know this is a national show, but let’s look at the Brisbane market for the moment. There are some offices that are almost totally driven on auction and others that are simply not in the same marketplace.
Justin:  Yes. It’s an interesting study. It comes from the top down, so it’s usually led by a principal or the sales manager who has that attitude. But one thing we’ve always subscribed to is the theory that whatever area you’re in, whatever suburb, whatever town that you’re in, whoever the dominant agent is in that area, what the attitude is towards the vendor-paid marketing in particular, open homes, method of sales – so auction or private treaty – that’s generally what dictates to the rest of the town, because they actually influence more sellers and more buyers than anybody else.
So, if their attitude is very pro-auction, the town actually then, by proxy, becomes pro-auction because they become more exposed to it. So, you actually can trace it back in a lot of cases, to whoever has the dominant market share in an area.
But it is always an interesting study, and we always think that the best businesses that we deal with have a balance, so they have a strong auction element but they also have a strong private treaty element, because if you put all your marbles to one side and you go all-in on one method of sale, the problem is when you go into a listing presentation and you meet a seller who doesn’t want that – they want the other side – you’re either going to be pigeon-holed as someone who doesn’t do it or you’re not going to have the requisite skill and they’re going to go to someone who does. So, I always think that one is a good thing for agents to strive towards.
Kevin:  Wonderful talking to you, Justin Nickerson. Justin, well-qualified to talk on this subject, of course, as I said at the opening, is the Australasian Auctioneer of the Year. Good talking to you, Justin Nickerson. Thanks for your time, mate.
Justin:  A pleasure, Kevin.

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