This is another installment in my quest to change how homes are sold.
In Australia, 98% of the homes are sold by auction. The guy who was the main auctioneer for Harcourts sold over 6,000 homes there by auction, and has since come to America. They are offering an auction option as one of the ways they will sell your home.
They don’t insist on an auction, they will sell your home the traditional way too – it’s just one of the choices for sellers.
They do include an undisclosed reserve price to make sellers feel comfortable that they won’t have to ‘give it away’ at the auction. They then input the listing onto the MLS at the below-reserve opening bid, and do several open houses leading up to the auction about a month later.
I had a long talk with one of their agents yesterday about their results.
Since they started about a year ago, the local office has sold 49 properties with the auction format. Here are the results:
62% of the homes sold before the auction.
12% sold at the auction.
23% sold after the auction.
While I’m a big believer in the auction format, it appears that our local society has yet to embrace it as the most effective way to sell for top dollar. While we were talking, I told Kayla she should get her auctioneer’s license and just hope it happens in her lifetime.
The big takeaway is how well the “attractive-pricing” format works.
Because the properties are listed on the MLS at the opening-bid amount, they look like deals. But sellers have no intention of selling for that price – they have already designated a higher reserve price.
Yet nearly two-thirds of the time they are able to make an acceptable deal with a buyer at some price point above the opening bid.
Buyers don’t mind paying a little more if they see the value. They know that if they really want the house, they might as well step up now and make the deal while certainty is available.
Our MLS already allows the goofy ‘value-range pricing’, where two prices are listed and buyers are supposed to guess what to do. We probably don’t need to replace that format, but the MLS should offer a new option:
List your home at the opening-bid price.
Every seller should consider adopting this format as the best way to instill excitement and urgency in buyers, and give them reason to bid early and often to win the property. Making it a contest where buyers compete for the home is the best way to drive the price up – and in most cases, more effective than pricing above comps and hope you get lucky.
You don’t even need the actual auction – it isn’t working that well anyway. All you need is an agent who can conduct a proper bidding war once the interested buyers emerge.
The traditional method of pricing above the comps works great when prices are rising rapidly, because eventually the market will catch up with you. But the frenzy is over now, and buyers are being much more cautious. If you don’t sell early, the buyers are watching the days-on-market closely, and will hold them against you, price-wise.
If we never get to the actual auctions, or we just work our way towards them over time, then fine. But what sellers need is attractive pricing to stand out from the crowd, and get the buyers’ attention. Conduct some open houses so they can see other potential bidders eye-to-eye, and then offer the chance of buying now when they have an open shot.
I will take your listing using either format, and give you everything I got. I’m suggesting that as the market ‘matures’, and prices flatten out, buyers are going to be increasingly reluctant to consider homes listed at 5% to 10% above the comps.
Using the ‘attractive-pricing’ format will set you apart from the crowd, give you maximum exposure and an obvious format to cause a buyer to pay a price that is acceptable to you.
That’s what you want, isn’t it?