Are property auctions going out of favor?

by Chris Lang on August 30, 2011

Real estate auction with no bidders Property auctions historically were the most poplar selling tool in Australia, but in the current market the clearance rates are significantly lower than they used to be. Even on the popular reality show “The Block”, 3 out of 4 renovated houses failed to sell on auction – an auction that was witnessed by close to 3.5 million viewers.

Everywhere you look, people go on and on about how The Block was such a huge failure.

News.com.au: “The tears from contestants after three of the four properties failed to sell at auction are a stark reflection of the reality for vendors across the country”

Business Spectator
: “A 400 person live audience, watched by over 3 million TV viewers, couldn’t entice more than one person to part with money rather than eyeballs”

But wait a second… did they really fail to sell?

Wikipedia says something very different…

All of the houses eventually sold, only one of them didn’t make any profit (Amie and Katrina’s), and the other 2 houses that were sold through private sale brought more in profit than the one auctioned ($50, 000 and $72,000 in profit!)

Winners of The Block

So what does this mean?

My guess is that buyers simply dislike auctions, and will avoid them – if they can. In a strong, sellers market, buyers have to overcome their anxiety and participate in an auction. Sort of like going to an unavoidable war, to win their dream. But in a soft, buyers market, when they can dodge an auction and still get their wish by buying through private sale, that’s what they will do.

Buyers hate pressure, and auctions are all about pressure, and about causing people make irrational decisions in the heat of the moment. Avoiding auctions means avoiding all this stress and possible costly mistakes, so it makes all the sense in the world for buyers to buy through private sale.

What do you think?

Photo source

{ 2 comments… read them below or add one }

L Richards September 16, 2011 at 6:40 pm

Interesting is the fact that the property that sold under the hammer provided the BUYER with a better buying price – Sellers are more negotiable on the day of the Auction. It is the Auction process that needs to be understood – it identifies buyers in the market(before or after)

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Sell Your Own House September 24, 2011 at 8:26 pm

I disagree with the introduction – auctions were never the most popular selling tool in Australia. I do agree though with the fact that most buyers hate participating in auctions.

At the end of the day, every buyer is prepared to buy via private sale, but not every buyer is prepared to buy via auction. So private sale should always be the seller’s first choice (well in most cases anyway).

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