Thread: Well the house is finally on the market!

Cool... and thanks for the thanks. For you guys, it is a big move. Michelle will come around, just might take time. We (the Simpson clan) have also had our moments of "what are we doing!!" but it all feels right now.


Hopefully see yu before we both go!

chris

Glad to hear it's gone well and you're happy with the result.

Without wanting to rake over the coals, and certainly not to accuse anyone of being liars, cheats, lazy or incompetent, I think the sale/auction question is important.

Consider:
When a house is to be sold, there will be a number of people interested - a good agent will publicise the property well to ensure most of the likely candidates are aware of the property. In this regard, apart from a sign on the property, the window of a local agent is likely to catch people who are looking in the area, (the agents should already have a list of people looking and what they're after), and the internet is a cheap way to catch the majority of the rest. Glossy ads in letterboxes or big spreads in the papers seem to me to be relatively expensive compared to the likelihood of catching a potential buyer the other methods wouldn't.

We now have a number of potential buyers, each of whom will have a different level of interest and a different budget. What it will come down to is that each has a maximum price they would be willing to pay for the house. Let's say A would pay 440k, B would go to 475k, and C would only take it if they could get it for 420k.

A good agent will work on these to point out the good features and downplay the bad to maximise what each is willing to pay. To my mind, that means inspection appointments where they can focus on the individual prospect. The appointments are made to suit the prospect (and the vendor), rather than asking them to turn up at a particular time for an open inspection. This is less hassle for the vendor, less security risk, and lets the agent do their best on each prospect (e.g. can stress closeness to things for one prospect and quiet location for another). It's also good for hte prospect - time that suits them, and able to ask all the questions they like. So now maybe A is up to 460k, B to 490, and C would now stretch to 430 (might like to pay more but really can't afford it)

Now to the sale - At an auction, C drops out at 430, A drops out at 460, and B holds the top bid at 461. Just before the final call, A, in the excitement of the moment, goes to 465, but when B comes back with 466, A is out.

In this case, the price obtained is 24k LESS than what B would have paid (and so B is stoked!). The vendor is happy - during the campaign 400-450 was being mentioned - but he didn't get as much as he might.

Simple fact is that at an auction the top bidder doesn't have to bid what they are prepared to pay - just $1000 more than the second-top.

Now, where there are two or more keen bidders, who can actually afford a lot more than they think the place is worth, you COULD get a runaway and people overbidding due to the excitement. I wouldn't want to bank on that, unless I know I will be attracting people who can afford a lot more than what the place is worth. Of course, this can produce an unhappy buyer who has gotten carried away, but unless it means the sale falls through because they just can't afford it, we might put aside our compassion for this undisciplined fool.

What about private sale? Here, you may be highly reliant on the negotiating skill of the agent. If they are good, they will get B to offer 490. Vendor is happy (!) and so is buyer - they got what they wanted at a price they were prepared to pay. If the agent is not so good, A B and C will put in offers well below what they are prepared to pay, and things will shuttle back and forth with each gradually upping their offer until, by this sort of defacto auction process, we get the same result as the auction, but with no chance of an emotional runaway. So private sale through a poor agent is same or worse as auction, but through a good agent should be better in the vast majority of situations.

The other option, which seems to growing in popularity (7 years ago we both sold and bought through this method) is like private sale, but potential buyers are only allowed to make ONE offer. Seems crazy? No. When the buyer can only make one offer, they have to make their best offer - the most they are willing to pay. If they don't, they may lose out. This method can also fail, if one buyer knows (or is good at guessing) what the others will offer (or if the agent is corrupt and reveals). With this method, even if the agent is not a very good negotiator, A will offer 460, B 490, and C 430. Bingo - the result we want. And again the buyer is also happy - they only offered what they were willing to pay.

If buying, I would tend to prefer auctions. Set my limit, don't go over. I might get a bargain, or I might pay somewhere up to my limit. I bought our current place the other way because that's the way the owner was selling it. I wanted the place, so I had to play by their rules. I paid as much as I was prepared to - so I was happy. I couldn't brag about getting a bargain, but I can live with that.

If selling, I would always go with the last method, unless I was very confident the rare conditions were present for auction to out-perform. I would have a high probability of getting very close to the highest price anyone is willing to pay, and not be overly dependent on the skill of the agent.

So, I reckon auction is not the best way to sell in the vast majority of cases, but it's not to do with poor agents (unless they have pressured the vendor into something to suit the agents own interests).