Auctions only way to sell in flat market: Agents

12 Jul 2011 - real estate business

Agents who are not actively embracing auctions in the current flat market are not being honest with their clients, a Qld-based realtor said.

“As the price of properties fall, only the poor agents fall back to private treaty,” said Ray White Caloundra Group director Tom Garland.

“This type of agent shies away from the true tough nature of our industry, the truth and brutal honesty. That truth is to be honest with our clients and give the news from potential buyers back to the seller as to what they believe properties [are] worth.”

Mr Garland was responding to the results of a recent Real Estate Business poll in which just over 64 per cent of the 322 respondents indicated that private treaty to be the most effective sales strategy in the current market.

He said auction-driven sales are thriving in the Sunshine Coast area of Queensland, and his business would have “gone belly-up long ago” if it had not embraced auctioneering. Results this year show his office is clearing 79 per cent of properties in 48 days through the auction process, while private treaty clearance is running at 18 per cent on 121 days.

“If you’re backing a horse in a race, wouldn’t you back the horse with the shortest odds?,” he added.

Phil Harris, managing director of Harris Real Estate in Adelaide, agreed with Mr Garland’s sentiment. He said he has noticed more South Australian agents listing properties on an ‘expression of interest’ basis, which usually meant an inflated selling price.

Agents who did this were unlikely to have confronted the vendor directly on price, usually a sign they lacked confidence and/or experience, he said.

“An auction is a great way to establish what a property is worth,” he said.

Toby Hutton, director at Raine and Horne’s Manly and Freshwater offices, located on Sydney’s northern beaches, said property selection was critical in deciding what to sell at auction.

He said he would only auction a property if he was confident it had the features buyers were looking for, and the state of the market or economy had much less to do with his decision making. “There’s no point auctioning everything.”

Properties that were on level land, had a north facing rear, were located close to public transport and positioned on a quiet street were generally ideal for auctions, he said. Raine and Horne Manly’s website said Mr Hutton retains a 90 per cent success rate at auctions.

Real Estate Institute of Australia chief executive Amanda Lynch said both auctions and private treaties had their benefits and weaknesses, although it was important for real estate agents to note the role of the likely buyer when deciding on the best selling method. For example, nervous first-time home buyers were generally more likely to prefer a private treaty as it was more controlled and predictable than an auction.

She added recent national property sale statistics suggested softer markets meant more private treaties and less auctions, in particular in Perth and Queensland. In these markets sellers were setting the tone, preferring the ability to negotiate hard on price that private sales generally presented.