We recently did some analysis on the effectiveness of auctions in the current market in the past 3 months. In Grey Lynn, Herne Bay and St Marys Bay, properties on average achieved a higher sale price above their CV when sold by negotiation than those sold by auction. Westmere was still the stand-out winner for selling by auction but for most other suburbs in the central city, sale prices under the hammer had dropped from the second quarter of the year.
So does this mean the market is returning to the good old days of transacting properties by negotiating for them rather than bidding for them? The current lack of properties on the market means there is some volatility in the numbers but it’s certainly fair to say that the low cost of borrowing is producing such high numbers of buyers that there should be enough competition to provide a good sale price without the expense and hassle of an auction.
It’s also fair to say that the up-front cost of legal fees, registered valuations and building inspections can make placing a bid prohibitive. We’ve had purchasers tell us they’re spending up to $5,000 in their search for a new home which is not only soul-destroying for them, it’s also detrimental to sellers as this investment is ultimately cutting into the purchase price.
For many vendors in the current market, there is every argument to suggest that a sale by negotiation could produce a better or equivalent price than an auction and we now factor this analysis into our method of sale recommendations to our clients. As with any sale process, the aim is to deploy a method of sale that is relevant to the buying conditions and makes the property available to the widest possible pool of purchasers.