Do auctions still work?

With a shift in the market, the question is being asked about whether or not the auction method is still the right move for vendors to get the best outcome for their sale?

Firstly let’s look at the figures. Currently in the Ray White Invercargill office, the average days on market for an auction campaign is 29 with a clearance rate of 73.9% after 90 days. Compare that to private treaty with average days on market of 27 but a much lower clearance rate after 90 days of just 59.2%.

These numbers do not only review the auctions that went under the hammer; but also include properties listed for auction that were either sold prior, withdrawn or converted to private treaty. The problem with using clearance rates in isolation as a success indicator is that they only show success at a singular point in time. Clearance rates isolate the auction day but fail to paint the story of an entire campaign. When reviewing the data over the course of a full campaign, auctions are still selling with considerably higher clearance over a 90 day period. This is a reflection of quality stock processing. The auction campaign gives three chances for a vendor to sell; prior to the auction, on the day or post.

The campaign requires the agent and the vendor to work within a framework that ultimately keeps them accountable, creates urgency and best educates market value. The deadline of the auction day creates the urgency for action; action for interested buyers to reveal themselves and action for sellers to be priced in line with the market. Even when a property fails to sell under the hammer, statistically the likelihood of the deal closing within the weeks post improves considerably as the vendors are more aware of market prices and agents have identified the buyers most likely to buy.

With declining clearance rates it’s easy to fall out of love with the auction process. True auction advocates understand that auctions, whilst fun when the market is absolutely firing, are actually best designed for more challenging conditions. The path of least resistance is to revert back to a private treaty sale. They require little accountability, no deadlines, and little process. Unfortunately, the data suggests they also provide fewer sales in more time too. The choice is yours.