Vendors often think they will start by marketing their property by Private Treaty at their ideal price just to see what happens, thinking they have time on their side.
Many tell their agent ‘If I don’t get my price I can always auction it.’
Does this work in practice? The short answer is sometimes. It works when the market is hot or trending up. On the other hand, when the market is hot or trending up, they will usually get their price during the ‘test run’.
The fact that they feel that Private Treaty has failed means that it is likely that the market isn’t so hot and the property is likely to become over-exposed.
In other words, the very people who feel that the test run was a failure are then set up to be disappointed at auction. By then, in a levelling or falling market the property is more likely to attract bargain hunters, no matter what method of sale is used.
Valuable time has been lost, and unless the market is trending up, the sale price is likely to be lower than if it had sold more quickly when the excitement of a new listing was in the air.
Auctioning at this point rarely creates the competition needed for a high price. Buyers feel that a vendor is unrealistic and often stay away from the auction – a death knell to hot bidding.
The best case scenario is that the auction will attract bargain hunters – another great way of keeping the price down.
