Some popular agencies will recommend exactly auctions to their clients regardless of market conditions - perhaps because their franchise manual tells them to. There are arguments made about auctions putting upward pressure on the price, but it doesn't always work that way. Perhaps the true reason is that AUCTIONS ARE BEST FOR AGENTS. For auctions to work, the agent needs to get a lot of advertising money from the vendor - and this advertising will have the dual effect of promoting the auction AND promoting the agent. However, auctions can be highly dangerous affairs and stressful affairs for both buyers and sellers, and can end up working counter to the best interest of the seller.
Auctions are dangerous for buyers, because the contracts made are UNCONDITIONAL with no cooling off period, building, pest or finance clause. Want to spend hundreds on a building and pest before having any solid idea of the price you'd pay to buy? You have to - with an auction. But so many buyers rather than do this will simply ignore the property and look for one where they have less risk and more time to think about what they are doing and knowing what they are actually buying. I know I think like that, and plenty of people I know think the same way.
You will get less real buyers at an auction and what this means in practice is that the person who loved the property the most and would have paid the most under normal circumstances won't even be there to bid. Result? You'll get less. The agent however, will get lots of publicity and a certain commission, if he can clear your reserve price.
Of course, a skilled and knowledgeable buyer who is cashed up, might be able to use an auction situation to pick up a bargain in a market like this. We are willing to go auctions for you as BUYER'S AGENTS - but not to sell your property unless you absolutely insist.
For sellers, the auctions results can be disappointing unless it is a raging seller's market. Even in seller's markets - auctions often achieve THE SECOND BEST PRICE. A lot of winning bidders have indicated that they would have gone a lot higher - but there was no one to bid against their last offer! A skillfully conducted tender situation could have yielded a better price for the vendor in many cases.
Auctions cost the vendor lots of money he has to use to promote the agency - and his property along with it. Should vendors really pay thousands to flash the face of agents all over the newspapers? If auctions are so good for vendors, why don't agents spend their own money promoting properties being sold for auction? They should be happy with 2.5% of the sale price for their investment, no?
Auctions, in buyers markets, are only for desperate vendors really - or unrealistic vendors who the agent wants to make a commission off and "educate" regardless of price achieved. One salesperson I know was having some people sell his own property by auction. They were pressuring him to accept a price which turned out to be $40,000 LESS than the price he obtained HIMSELF only TWO WEEKS later, without paying any commission. This sort of thing happens all the time.
We could make money promoting auctions but we don't, because we believe in the Golden Rule - "Do unto others as you would have them do unto you."
