HOW AUCTIONS GET LOWER PRICES

Homesellers tempted to auction their homes should remember four words: AUCTIONS GET LOWER PRICES.

Never mind what agents tell you, never mind what you read in the papers, auctions are a financial minefield for consumers.

Despite the booms in many areas, thousands of homesellers are turning their backs on auction and benefiting. But there are still thousands of sellers who don't realise, until it's too late, what happens to them at auction.

They get a LOWER price, that's what happens.

If someone is trying to talk you into selling by auction, then before you sign anything, please read this.

NINE REASONS AUCTIONS GET LOWER PRICES

1. THE STARTING PRICE

It seems as if the price goes up at auctions. But that's only because it starts LOW. It's like starting the day with a massive hangover and saying that you are going to feel better as the day progresses. That's not a good reason to get drunk every night. Avoid drinking and you avoid the hangover. You start the day in good shape.

2. RESERVE PRICE

The reserve price is the price at which the home can be sold. It's the lowest price a seller is prepared to accept. And that becomes the central focus of the auction.

If you are trying to get the highest price, do NOT make your lowest price the main focus of the sale.

Most buyers at auction buy for less than their limit which means most sellers at auction under-sell their homes.You can't possibly get the highest price for your home if the central focus is on the Sellers' Lowest Price. You can only get the highest price if the focus is on the Buyers' Highest Price.

As a seller, you are at a huge disadvantage because your lowest price, the 'reserve', is always disclosed BEFORE the home is sold. That's when you hear the agent yell, "It's ON the market". Everyone knows your lowest price.

Not so with the buyers. IF their final price is ever disclosed, it will be AFTER the sale is over. By then it is too late for the sellers.

This is how auctions get lower prices.

3. REPELS BUYERS

Research shows that more than 90 percent of buyers do NOT like auctions. It makes no sense to use a system of selling disliked by most of the buyers.

And this is how auctions get lower prices.

4. INCONVENIENT

One of the BASIC rules of marketing is: make it EASY for people to buy. Auctions do not make it easy. They make it hard. Many buyers see that a home is for auction, and if the date doesn't suit them, they don't even bother to enquire. The buyers that are lost in this manner are often buyers who would have paid thousands of dollars more than the auction's final selling price.

And this is how auctions get lower prices.

5. BARGAIN HUNTERS

Investors, property dealers and bargain hunters all know that auctions are one of the best places to find cheap deals in real estate. Property investors, developers and dealers often buy at auction. But they almost NEVER sell at auction. That's because auctions get lower prices.

6. COMPARATIVE

If two or more people want to buy the same home, the worst thing you can do, from a negotiation point, is to allow each person to SEE what the other is offering! Instead of offering their highest price, each buyer will only offer a SMALL amount above what the other buyer offered. And this is how auctions get lower prices.

7. DECEPTION

To persuade sellers to auction their homes, agents will talk about high prices. And then to get buyers to come to the auction, the same agents will talk about low prices. Most times both the seller AND the buyer are deceived. The most infamous deceit is Dummy Bidding where agents use bogus bids to keep the auction moving. Some agents deny that Dummy Bidding exists. But consider this: How do you have an auction with only ONE bidder?

And this is how auctions get lower prices.

8. SELLS TO THE WRONG MARKET

Auctions attracts buyers who want to buy at the LOW price NOT at the price the seller wants. The agent will then say to the sellers, "This is what the market is telling us." But the agent has been looking in the WRONG market - a market BELOW THE VALUE of the home.

This is how auctions get lower prices.

9. FAILED AUCTIONS

When a home does not sell at auction - and thousands don't - it is labelled a "failure". Buyers think something is wrong with it; and many will offer LOWER prices. Like a wounded animal with vultures circling, failed auctions are easy prey for bargain hunters.

This is how auctions get lower prices.