SILENT AUCTION

As a seller determined to achieve the highest possible price, the one thing that you should never do is let your interested buyers know what other offers you have received. Why? Because the focus for the interested buyers becomes outbidding the competition by $1,000 as opposed to focusing on the highest price they are willing and able to pay. As a seller determined to achieve top dollar, you want to know the highest price every buyer will pay for your property, not the highest bidder.

If you line all of your interested buyers up in front of each other and point a hammer at them (aka Public Auction), you end up with a series of $1,000 bids to close the sale out. But what happens if the final bidder is prepared to pay $50,000 more than the second highest bidder? If bids are going up by $1,000 at a time, the seller loses $49,000 they could have had. This happens every Saturday across Sydney - sellers sell their homes for less than the buyer was prepared to pay for it.

It amounts to silent pain for the seller and silent gain for the buyer.

Competition
Negotiation experts (and card players) agree that you never let the other side know your position. During a hand of poker, have you ever seen a card player turn their cards up for the table to see and ask the competitors in the game for advice? As a property seller, why let the buyers see your cards? Agents often talk people into auction as a way of “creating competition”. What is often overlooked is that buyers are competing for the property, not the process of sale. Interested buyers will compete for the home regardless of the sale process.

Public auction bidding is not competitive – it is comparative. When a bid of $1,000,000 is made at an auction, the next bid will be $1,005,000, or $1,010,000. It won’t be $1,200,000.

The buyers are watching the competition bid so they bid at comparative levels, not competitive.

Campaign
Public auction campaigns focus on maximising the number of interested buyers and setting a deadline for those buyers to act. This is what all agents should do regardless of the sale process though. Some may say that by having a public deadline, it pressures buyers.

That may be true in some cases. But it also pressures sellers to “meet the market”. If not, they risk passing in at auction and being recorded in the Sunday paper as AUHB (Auction Highest Bid). That won’t help the seller achieve top dollar either. So the deadline creates equal pressure on the buyers and the sellers. This scenario is orchestrated by the agent to ensure a sale gets made. At a public auction, getting a sale on the day in front of the crowd is usually the agents priority over attaining the highest possible price every buyer is prepared to buy.

Silence is Golden
In Scotland, when they are ready to close out a real estate transaction, all the interested buyers submit their best, highest and final offer in a sealed envelope for the seller’s consideration. Some call this a “silent auction”. In most, if not all cases, the owner sells the property to the party with the highest offer. The Scottish enjoy a quid. They know that if you let a $1 million buyer see that the next best offer you have is received 900,000, you will only get offered $910,000 from the buyer that was prepared to pay $1 million. How do you justify asking for the extra $90,000 then?

David Beauregard of Harris Partners explains below how the sale of Dusty’s terrace in Balmain achieved the highest possible price using a silent auction.

“The property generated enormous interest in a short period of time. It was decided to set a deadline on the interested buyers to ensure closure whilst the interest was high. The deadline was not advertised though, as this could have potentially pressured Dusty into an unnecessary position. We agreed to set the reserve at $2,000,000.”

“All 4 interested buyers submitted their best, highest and final offer prior to the deadline. They came in at $1,950,000, $2,050,000, $2,150,000 and $2,210,000 respectively. Even though Dusty’s reserve was $2,000,000, a public auction would have sold the home for $2,155,000. This result would have delighted Dusty. But, by conducting a silent auction sale, they sold for an extra $55,000 above what a public auction would have achieved.”

“Most of the marketing components in play for a public auction work equally well for a silent auction. It is the process of closure on the sale where the game is won or lost.”

Buyers
David believes that most buyers are happy buying through silent auction for 2 main reasons.

“At a public auction, all the under bidders end up declaring their walk away price. There is nothing new or untoward in the buyer disclosing what their walk away price is going to be. We are simply saying that unlike a public auction, a silent auction won’t sell a property to a buyer for $2,155,000 when they are prepared to pay $2,210,000.

“Secondly, research shows that buying at a public auction is a home buyer’s least preferred method of purchase. As public auction has demonstrated though, buyers will still try and buy a property that is right for them, even if the sale process isn’t to their preference.”

David notes that low stock levels and high demand has meant that interested buyers tend to go along with the sale process outlined by the seller and agent.

By allowing buyers time, space, respect and privacy in a silent auction process, the sellers actually attract more buyers to the property.

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