Auctions are getting out of control in Auckland

by Alistair Helm in


The latest data from the May property market as reported by REINZ states that of all sales in Auckland; 38% “went under the hammer” – up from 28% a year ago, outside of Auckland auctions are also on the rise albeit off a smaller base up from 7% of all sales a year ago to 9% in May.

The comments within the real estate industry as expressed by Harcourts Northern regional manager support these rises saying “Sellers are wising up on the benefits of auctions – higher prices with less fuss”! She went on to say “sales by auctions had shorter and more thorough marketing campaigns that limited ‘stress periods’ for vendors

Sounds perfect – less stress, less fuss, higher prices!

The fact is, not only are auctions becoming more the norm, they are also being compressed into a shorter marketing period, which in my view is dumb and somewhat illogical.

Take the data for today (13th June) – in Auckland 185 new properties came onto the market. A pretty normal day, although Thursday’s tend to be busier (a hangover from the days when this is when the property magazines used to publish the weekly selection). Of these 185 properties; 98 (53%) were auctions, with 28% being marketed with a price and the balance for sale ‘By Negotiation’.

More than half of all new listings today are being marketed by the auction method of sale.

However when analysing the auction date for all of the 98 auctions, what I found even more alarming is that nearly two thirds of those new auction listings have an auction date of 3 week or less from today. A staggering 1 in 12 have an auction date before the end of June, with one providing only 9 working days between listing and auction.


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Making the process of selling your house a rushed and truncated process is sure to do one thing – spook buyers.

Buyers who are already pulling their hair out trying to bid on houses with so little time to do undertake due diligence. As to the claim made by Harcourts Northern regional manager of ‘higher prices’. This is a claim that can never be truly substantiated, there is never a ‘control’ benchmark for houses; they are all unique in form, location and circumstances; measuring against CV is misleading as that is proven to be a poor benchmark.

So real estate agents who are paid a commission by sellers and who have the sole interests of sellers at heart, are constantly pushing auctions. Nowadays as the supply constraints grow larger these agents are choosing to recommend shortening the selling period. In my view this can only drive more potential bidders / buyers from the market, rather than as they hope, bring more buyers together to bid up the price.

Just imagine this scenario played out by an Auckland couple who are in the market ready to buy.

This young couple have been looking at buying a house for over 6 months, they constantly hear tales of super-heated property market and having already lost out on an auction or two already, stress levels are high! They get an email alert today for a property which meets their criteria. They review and decide to view at the weekend, they can’t do Saturday as they are away, so they attend on Sunday. They like the property a lot, but the auction is on the 3rd July, just 13 working days away. Now normally they would go back to view again the property on the second weekend before deciding if they are keen, but they realize the urgency. So they talk to their bank next Tuesday who show support for the price they think they can bid to, however the bank tells they will need a registered valuation.
The couple pause – they don’t want to spend another $600 for a valuation – after all they have only seen the property for 12 minutes so far!
They decide to wait until a second viewing at the weekend which goes well; so on Monday 24th June they decide to get a valuation. The valuer though says he cannot fit them in until Friday the 28th (just 3 working days from the auction). The next question is should they do a building inspection? – left with just 6 working days they decide to forgoe this, although they do request a LIM through their lawyer.
Days go by and the weekend of the 29th / 30th lets them see the property a third time, but with no real idea of the condition or what the valuer says he will value it at. By Monday pulling their hair out and loosing sleep, the valuer delivers the valuation placing the property at a value just below the level they had hoped based on their loan to value ratio. However all is not lost. One of the parents has said that if they needed they would lend them $30,000 to help if they needed it. They call up on Monday night to literally plead for help, however the access to the money is not available due to the money being on a term deposit. Whilst they could have bid at the auction and as they find out later with that $30,000 they would have been able to buy the property; they just gave up - totally frustrated on Wednesday night, instead of celebrating their new home, they drown their sorrows, vowing to give up on buying a house - they have a guts full!
(Note this is a scenario of a couple who are renting and don’t have a place to sell, just imagine the compounding issues if they had that property to sell, scraping together the cash deposit and then the panic about selling their own house).

So another prospective buyer fails to present themselves to the seller, unbeknownst to the agent. How many buyers are being squeezed out of the market by such circumstances? Equally how many buyers are buying without due diligence? This could be a dangerous long-term issue especially if there tuen out to be structural issues with the house.

Agents may well like short notice auctions. They may well get a sale and thereby service the vendor in a shorter period (this is clearly their idea of reducing 'stress') it certainly meets their needs as they get paid sooner with less work. Let's not forget that an auction requires less work by the selling agent around the process of facilitation and negotiation, the auctioneer actually does the negotiation at the auction.

Finally what about that claim about auctions provide 'more thorough marketing campaigns'? Auction marketing is no different to any other form of property marketing, except for the date of sale and the word ‘auction’ in the marketing material and of course the cost of the auctioneer. Properties all get loaded onto Trade Me and in the same way and promoted online the same way regardless of the chosen form of sale. Arguably and perversely the shorter auction period is further reducing the relevancy of print advertising, as lead-times for print are measured in days rather than the seconds it takes to get a property online.

Auctions are undoubtedly the favoured method of sale by agents, this they detail to vendors citing the data of 38% of all Auckland sales being by auction, but beware of these number as sometimes what is reported as an auction was not a true auction sale. However the vendors should be more wary; they actually end up undertaking a sub-optimal marketing of their property by going for an auction or worse a short notice auction. They may actually end up eliminating buyers and thereby reduce demand for their house.

The underlying problem is that this situation in today's market not become transparent as due tot he current demand as long as they get just 2 bidders at the auction the property may well sell; but the question has to be asked, was money left on the table?

In my view marketing a property needs to be focused process undertaken with consideration. It should be undertaken with an appropriate period of time. Sufficient enough to allow prospective buyers to satisfy themselves of the property, undertake due diligence and approach the sale in a clear-headed manner. That period is probably between 3 and 4 weeks. I think a fixed date of sale is appropriate in fact I think there should almost be a sell-by-date. I favour tenders as a method of sale - it achieves the same outcome as an auction without all the hype, razzmatazz and undue very public pressure!  

Whilst on this topic it is relevant to reference the analysis undertaken by highly regarded ecomomists and authors of Freakonomics Stephen Dubner and Steven Levitt who, when analysing the sales of agents homes in the US (as the video below shows) and found that agents marketed their homes for longer; 10 days longer than their clients' homes, and they ended up getting a better price. Makes you think!


The 6 steps to selling your house

by Alistair Helm in


It almost seems too logical to write an insight into the process of selling your house, but sometimes it is valuable to spell out the steps in detail, after all real estate transaction is a process and in my view there are 6 main parts to this process.


1. Preparation

Selling a home is a major undertaking, doing it yourself or through an agent you need to think it through carefully. Is this the right time to move? It will take a fair amount of your time and focus for what could be a month or two or more. Selling for most people is alos at the same time associated with buying, as you are generally looking to move to a new home from your current home. Buying takes time too. So don’t underestimate the total time commitment.

Preparation is also about getting to understand the property market. Spend some time preparing yourself by visiting open homes in the area that are similar. Look to see how your house compares. Find out what these houses sell for, go to the auction or speak to a local agent. Be better informed.

Make sure you have discussed your financial situation with your bank or financial advisor so you are clear as to how much you can borrow based on your anticipated selling price.


2. Presentation

Selling a home is a task that requires you to present your property in the most appealing way to appeal to the widest audience. Make sure the house is clean, clear and everything works. Make it look its best.

When it is looking at its best get a professional photographer in to create an extensive portfolio of photos – get a wide selection from which to choose around a final set of 20 photos. A professionally photographed house is one of the most important things to do tin selling your house. It is in my estimation one of the most overlooked or "handed-off" tasks. It is madness not to invest in quality professional photography. It may cost you $500 but that amount will pale into insignificance in the context of how much the house is worth or how much you might spend on an agent, legal fees or marketing costs.


3. Marketing

The marketing of property today has become a whole lot simpler than it was a decade ago. Simply put the decisions about property marketing start online and then moves to decisions of additional media only after the main online campaign is set up and running.

Trade Me has to be the #1 focus. Choose the best 20 photos and select them in an order that tells a story and leads a prospective buyer virtually from the outside of the front of the house, through the house, finishing in the garden. It is so important for the first photo to be of the outside front of the house. The term “kerb appeal” is so relevant to the physchology of how prospective buyers see a house and creating that impression online is so important. The first photo appears in all search results and email alerts and marketing communication it is the image that will either attract or turn-off prospective buyers. If it fails to capture the interest in a search result everything else you do is lost as the buyers will never see the other 19 photos and inherent appeal of the house.

The fact is the online listing of a property for sale is all about images, as recent research has shown the key is the photos, the description is of lesser importance.

In terms of written information the best advice is to keep it short and highlight the benefits of the property rather than reiterate the features which are potentially self-evident or else already detailed on the listing. By this I mean don’t talk about '3 bedrooms, 2 of which with ensuites', describe the benefit of the ‘master bedroom with ensuite and dressing room is set apart from the other bedrooms providing privacy’. Talk about the convenience of local shops and public transport which is only 3 minutes walk, rather than blandly say “set in this beautiful suburb".

Having set up the listing, the next stage is to actively promote it. Marketing is all about capturing attention and this is where money is well spent. Go for a feature listing to place it in the top section of search results and also look to splash out on a super feature to really make sure your property gets more views than others. It’s a competitive world online and you need to be seen to capture interest and these promotion campaigns generally double or more the number of views – that does not mean it doubles the number of buyers but every bit of exposure helps.

All of the above online promotion and listing should apply to if your property is listed with an agent, these two websites and their respective apps should be your primary thought when it comes to marketing your property.

As to other media devices. Well a ‘For Sale” sign still has some merit, although in today’s world less relevance as people are less taken to drive around a neighbourhood – the web is the most efficient means of search and so much cheaper. Print advertising in newspapers and magazines might make you feel good to see your house beautifully presented in glossy colour, but you have to ask yourself “who is going to see it, and are they not as likely to see it online?” There is no doubt that property supplements in newspapers and property magazines get viewed, but given their focus on real estate companies sequentially branded pages they are not the choice of serious property hunters. My advice – spend the money online and then, decide if you want to spend almost the same amount again for a print advert!


4. Facilitation

This is the part of selling a house which gets to test the capability of the selling agent. Houses seldom sell themselves without the necessary follow up by an agent to those prospective buyers who have shown interest by contacting the agent or visiting the open home. This persistent follow up and seeking out of information is where the value in an agent really shows through. They do this work day in – day out and know how to look for the signs of interest and to be subtly persuasive. They know how to keep buyers interested and get them to visit again.

Most of all what they are good at is getting buyers to commit – that first critical step of making an offer. They know the contract and terms to steer that would-be buyer to make the initial offer.


5. Negotiation

This is the challenging part. The agent representing the vendor is seeking a favourable outcome, one where the vendors’ interests are paramount. The buyer is generally cautious and seeking their best interest. The value in the agent is to maintain the buyer commitment to the purchase of the property whilst negotiating the best terms that meet the vendors’ requirement. The agent is adept at knowing when to ease off and when to quicken the pace and move things along.


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6. The Close

Whilst the close is a natural consequence of the negotiation the ability to close a deal is probably the most important capability of any salesperson and when it comes to property transactions this skill is ever more important. The whole process of property buying is emotionally draining and challenging but at the end of the day the vendor wants to sell and ideally the buyer wants to buy, but you cannot simply assume that the contract will be signed. The close, as with all good selling techniques will utilise a myriad of options all seeking to get that agreement for both parties to sign.

From the signed agreement, so starts the legal process of completion and settlement, not a time to sit back and assume everything will complete satisfactorily and it is likely your agent will be diligent to see all components are taken care of right until the date of moving and the handing over of keys. 


If you are about to sell - good luck. My advice is get involved, even if you are using a agent take control - especially when it comes to marketing. It is likely int his day and age that you have bought and sold more household items on Trade Me than will have an agent and this actually is a skill you probably didn't realise you had, so use it.