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Selling at Auction
A set date, no cooling off, a minimum reserve, a room full of bidders: there are many benefits to sale by auction, even if you find it a little nerve-wracking.

Selling at Auction

There are two ways to sell your house: you can simply set a price and wait for a buyer who is prepared to pay it (sale by private treaty), or you can arrange for potential buyers to bid against each other at an auction.

Among the advantages of selling at auction are:
  • competitive bidding in an open market can result in a higher sale price than private treaty;
  • with a set date for the auction, you can control the frequency of house inspections;
  • If the reserve price is reached, you have a sale;
  • if the reserve is not reached, you have identified likely potential buyers to
    negotiate with.

Selling at Auction









Getting the Right Agent

Selling your home can be a nerve wracking experience with some pitfalls so it pays to find a good agent. Look for successful local experience and good communication skills. Make sure you feel comfortable that the agent understands your needs. Enquire of neighbours and friends who have recently sold properties in your area.

You will need to satisfy yourself about the agent's commissions, fees and charges. Obtain quotes and ask what these expenses cover (time spent promoting and selling your home, advertising and administrative costs). Discuss how they plan to promote your home - newspaper advertisements, letterbox drops and open houses.

You'll need a written contract with the agent, called an agency agreement. This sets the reserve price for your property and how much commission you'll pay. I t also usually gives the agent exclusive rights to sell your property for a period after the auction if post-auction negotiations or advertising are required.

You cannot advertise your house for sale until you have prepared a Contract of Sale. This contains a copy of the title documents, a drainage diagram and the Zoning Certificate issued by the local council. Any property exclusions must also be included plus a statement of the buyer's cooling-off rights, if they apply. The draft contract must be available for inspection at the agent's office. You should consult your solicitor or conveyancer about preparing the contract to make sure that everything is in order.

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Reserve Price

This is the lowest amount you are willing to accept for your property. Before bidding begins, nominate your reserve price to the agent. This information is confidential and should never be disclosed to prospective buyers.

The reserve price should be set at a realistic amount because if the highest bid during the auction is below the reserve price, the property will be 'passed in' and you may be back where you started from, though considerably out of pocket. If your property is passed in you may seek to negotiate a price with interested bidders.

If the bidding continues beyond the reserve price, the property is sold at the fall of the auctioneer's hammer.

Incidentally, in the past, some agents have given vendors inflated estimates of the value of their properties in order to obtain a listing. In some States it is now an offence to quote to a property owner an estimate of the selling price that does not reflect a true estimate. It is also an offence to publish an advertisement or a make a statement in the course of marketing a property that falsely understates the estimated selling price to potential buyers. Check your local Fair Trading authority for clarification on this point.

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Pre-auction offers

Sometimes a potential buyer sees a property but for some reason or other is unable or unwilling to go to the auction. Such a buyer may make you a serious offer before the auction date. If this happens, you'll need to get your agent's advice.

The agent may say that the offer is a good one and is unlikely to be matched at the auction itself. If you are satisfied that this represents the highest price the market is willing to pay, the agent should then insist that the purchaser exchange contracts before the auction date. This is the only justification for bypassing the auction process altogether. The agent will usually refund any unused advertising or other costs.

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Before the auction
  • Have the contract ready well in advance of the marketing campaign.
  • Agree on an effective marketing campaign that reflects best value for the amount you are prepared to spend.
  • Ensure that the house is well presented: a buyer's first impressions are vital.
  • Keep the reserve price confidential.
  • Stay in touch with your agent and allow as many inspections as possible.

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Renovations

If you're thinking of renovating before the sale you should be aware that the associated costs may not be recovered through an increase in sale price. So don't over-capitalise. Also, prospective buyers are often prepared to pay a premium for the potential they can see in a house needing renovation.

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Getting your House Ready


Inside your home
  • Do a spring clean, get rid of the junk.
  • Consider applying a fresh coat of paint in run-down areas.
  • Check that all your fixtures and fittings work and are clean.
  • Have your floors professionally cleaned.
  • Clean sinks, baths and toilets of any discolouration which may be a tell-tale sign of faulty plumbing.

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Garden

Real estate market research tells us that the decision to buy a house is commonly made within 42 seconds of seeing the property. In fact, many houses
are sold before the buyers even get out of their cars. It's all about first impressions.
  • Plant some flowers or hire or borrow shrubs. Make it a project to weed your garden, mow your lawns, prune your trees and keep it all watered.
  • Keep your driveway and paths swept, including the path on the street outside your home.
  • Clean your windows, clear the gutters.
  • Show how big your garage or shed is by getting rid of the clutter. If you sell your house, you'll have to get rid of it anyway (or take it all with you).

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On the day of the inspection
  • Show how your house fills with natural light by opening all the curtains and blinds.
  • If your house feels cold, heat the rooms. If it's hot, open the windows to let the breeze in.
  • Have a vase of flowers near the front door for first impressions. Flowers in other rooms too, but don't overdo it.
  • Put away some of those much-loved but idiosyncratic objects that might say a lot about your taste but tend to distract potential buyers from seeing the space they want to see. Buyers are turned off by too many personal belongings cluttering the space.
  • Buy some bright new towels and hang them in the bathroom.
  • Smells are crucial. Make sure your house is properly aired. No pet odours, no cigarette or strong food odours.Try a few drops of vanilla baked in the oven to fill the kitchen with a pleasant aroma.
  • Play soft music on the radio/stereo.
  • Make sure your valuables are secure, including jewellery, cash, precious keepsakes and any prescription medications.
  • Don't be there when people come to inspect. Leave the hosting to the agent.
  • Remember, try to make a strong positive first impression. Some of the people coming through your house will be looking at another five houses on the same day.

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Contracts

Assuming that your property sells at auction, the successful bidder must sign the sale contract and pay you a deposit on the spot (usually 10 per cent).

Exchanging sale contracts is the legal part of selling a home. There are two copies of the sale contract - one for you and one for the buyer. You each sign one copy before they are swapped or 'exchanged'. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent.

Remember, there is no cooling-off period when you sell your house at auction. If it is passed in at auction but negotiations are successful and the contracts are exchanged on that same day, the cooling-off period still does not apply.

Settlement, the payment of the agreed price in full, usually takes place about six weeks after contracts are exchanged.

We certainly hope our guidelines and tips pay off for you and the auction delivers you the price you want. So now if you're back in the market, you might like to check our Buying at Auction tips.

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