Even if you weren’t one of the 1.8 million Australian’s who watched the finale of The Block last week, you’re probably heard about the perceived underwhelming results achieved by several of the properties.
While the winning team achieved beat their reserve price by an amazing $335,000 when their property went under the hammer, and the runners up sold theirs for $310,000 over the reserve, 2 of the properties only sold for $10,000 over the reserve – which left a lot of people shocked and questioning what went wrong. The thing is though, under normal circumstances this would still be seen as a good result. But by comparison, and because of the artificial situation and the unrealistic expectations The Block creates, it appears as though these 2 properties performed poorly.
These results are an excellent example of the risks involved with attempting to purchase, renovate and sell a property to make a quick profit. The truth is, while you can produce an amazing design, filled with designer furniture and fittings, in the end the market will ultimately decide what the property is worth. This is why market research and analysis is so important to a sales campaign. If you don’t have a good understanding of the market, you can get caught out and be left disappointed. This is especially true when setting a reserve price in auction campaigns.
Real estate isn’t like a game of monopoly, you can’t just name a price and expect people to pay it. You need to arrive at an intelligently set reserve price that takes into account a number of important factors. ACT Auctioneer of the Year Mark Larmer says that: “A good agent should help to educate sellers on the state of the market, the level of interest in your property and what buyers are willing to pay. You should be adjusting your sales expectations and reserve price throughout your campaign based on changes in the market and the feedback you receive.” The reserve price should be the price you are happy to sell at and should give an indication of what the property is worth.
That’s not to say that you can’t get results above and beyond your expectations. There was a record setting auction in Campbell just last weekend that did exactly that, selling for $2.33 million (more than $100,000 over the reserve). For results like this though, you really need to make sure you are auctioning the right property and attracting the right competition. It helps that it was an impressive and well-presented property, but clear and transparent communication with potential buyers and attention to detail at every stage also had a significant impact.
With auctions, it is your agent’s job to talk to a wide range of buyers, present a compelling value proposition for the property and get them excited to bid on the day. Jonathan Charles, the agent in charge of the Campbell sale, also points out that “It’s really important that you work with buyers and make sure they are informed and ready to bid. You need to educate them on the process and let them know exactly what to expect on auction day. We had 8 registered buyers on the day and achieved a great result for both the buyers and the sellers. Both parties were really happy.”
For auctions to be successful you need to have a certain level of competition. When you have enough interested buyers, that’s when competition kicks in and drives the price up. According to Mark Larmer: “Auctions are really just a form of intensive negotiation between a number of interested buyers all at the same time. They let you find out who wants the property for the most amount of money. And if a buyer really loves the property, they are usually happy to pay a little extra to make sure they get it.”