Pros of Selling at Auction
There are several reasons why sellers choose to sell property in New Zealand by auction. One of the most significant is that auctions tend to generate competitive bidding, leading to potentially higher sales prices.
There’s a bit of a buzz around auctions, which helps to draw attention to the property. This is especially useful if the property is unique or has a particular appeal that may not be immediately apparent to potential buyers.
Another advantage of selling at auction is that it’s a fixed timeframe which can generate a feeling of urgency amongst potential buyers. Having a deadline often leads buyers to feeling like they may miss out if they don’t decide quickly, which can generate more bids and push up sales prices.
Because the auction process is transparent, it provides a level playing field for all bidders and, because selling at auction is an unconditional sale, it offers certainty for the seller. Once the hammer falls, the sale is final, and the seller can move on to their next venture.
Cons of Selling at Auction
While there are certainly advantages to selling at auction, there are also some potential drawbacks. One of the disadvantages is the potential for low turnout or low bidding, something we’re seeing a bit more of in the current property market. If there aren’t enough bidders, the property may sell for less than it’s worth or be passed in and remain unsold.
Another potential disadvantage is the pressure on buyers to bid higher than they intended. This pressure can be due to the competitive nature of the auction process, or it may be down to the auctioneer’s tactics. It can lead to buyers feeling like they’ve overpaid for the property, leading to buyer’s remorse.
Auctions can be costly for the seller with auction fees ranging from 1-3% of the sale price, and the seller may also need to pay for marketing and advertising costs on top of this.
Finally, auctions provide limited opportunity for negotiation and because they’re unconditional, the sale is final at the fall of the hammer. For buyers, that means completing due diligence ahead of the auction, with the possibility of paying for these costs but missing out on auction day.
Current Property Market in New Zealand
It’s been a quiet start to 2023 for auction activity in New Zealand, with financial website interest.co.nz reporting just one in four properties being sold under the hammer in February 2023, with the remaining either being passed-in, postponed, or withdrawn from sale.
Across New Zealand, auction results have been mixed with some auctions still achieving high levels of bidding and sales figures well above the reserve price, while others are seeing low turnouts or low bidding with many properties not selling at all.
While auctions remain a viable way to sell property in New Zealand, providing a transparent and competitive process that can lead to potentially higher prices, in the current property market there may be drawbacks. It’s worthwhile seeking advice from an experienced real estate agent as to the best method of sale in your area and for your property if you are considering selling.
For financial advice around securing bridging finance to see you through selling your existing home while buying a new home, contact a Mortgage Express branded mortgage adviser today.