Auction houses Vs Estate Agencies

I found this artical on Property 24 website and thought it may be of some interest to you. Enjoy.

04 Oct 2012

In the past, a home on auction would probably have belonged to a distressed seller, someone who had fallen on hard financial times and had his or her home repossessed by the bank.

Today, however, more and more estate agencies offer auctions as an option to their sellers, as an addition to the more traditional estate agency sale. Buyers in a rush to sell their properties may find the idea of an auction more appealing, as properties move more quickly selling this way.

Heidi Franck, Group COO at One Property Holdings outlines how to decide on the best option for your property. The residential property market is slow and due to the current economic climate, there is little growth.

That said, sellers will still sell their properties, but it is taking much longer than previously, depending on its value. “Houses that are priced below R 1 million will sell more quickly, as there are more buyers in this market than for the more expensive properties,” Franck explains.

To this end, buyers in a rush to sell their properties may find the idea of an auction more appealing, as properties move more quickly selling this way. Most sales that take place on auction do not have conditions or ‘subject to’ clauses, Franck says. Buyers at auctions are required to put down a deposit and have been pre-approved for a bond by their banks prior to bidding, so the sale on auction is unlikely to fall through due to the inability of the seller to qualify for a bond.

Moreover, it frees the seller from dealing with buyers who are not serious - if they make a bid on the house, they generally have their ducks in a row and mean business. On the downside, commissions charged by auctioneers are usually higher than those of estate agents. This is due to the intensity of the specific marketing that is done around an auction, says Franck. “While an estate agent is able to place an advert in the paper, bringing in a pool of buyers that they can then refer to, as well as all the other properties on their books, an auctioneer’s marketing has to be more targeted – and this comes at a premium."

That said, the buyers that arrive at the auction have specifically chosen to bid on your house alone, says Franck, and there is a greater chance that they will commit to a sale if successful, than people who have simply popped in to see a show day and like what they see.

On the other hand, when going with an estate agent, there is the potential to get a higher price for the property, she says, which is mainly due to the fact that estate agents are usually area focused and have an intimate understanding of their specific market. "Optimal market knowledge together with the incentive of a higher commission that results from achieving a higher sales price will inevitably drive a more lucrative sale.”

According to Marc Zlotnick, Managing Director of Forsite, there are positives and negatives to both methods. “Auctions are quicker processes, but the commissions are higher and the agent area expertise may not be as good. "Traditional estate agency sales take longer, buyers are messier to qualify but the agents are more negotiable and the parties feel as if they have been more participative in the deal.” At the end, however, true market value will prevail – because property is bought and sold when a willing buyer and a willing seller agree on a price in an open market.

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Why Auction You Property Part 3

As we continue on our journey in discovering why auctions are the best way to sell your property, I'm going talk today on a subject that I have already mentioned in previous posts.

No Suspensive Conditions

If you have been in the property market you will know what I mean by suspensive conditions.
But for those who are new to the property market I will explain what suspensive conditions are.

Suspensive conditions can be your worst enemy or your friend. Suspensive conditions are conditions that are added to a sale agreement if the purchaser has to apply for a bond or has to sell their property in order to buy your property. In other terms suspensive conditions can also be called "subject to".

Under normal selling conditions through estate agents the purchaser can have all the power and dictate to you the seller as well as the estate agent. They can insist on suspensive conditions. The reason they do this is to safe guard themselves. So if anything goes wrong they can walk away from the sale leaving the seller and the agent at a lose.

With auctioning suspensive conditions do not apply at all. So there is no waiting and worrying if the sale is going to fall through because the purchaser has not been able to sell their property or they have not been able to raise the finances. All purchasers have to either have their finances ready or be pre-approved by a financial institute. Without the suspensive conditions, puts the seller back in the driving seat.

I hope this has  helped. If you still not sure please comment and I will get back to you as soon as I can.

See you on Monday for Part 4

Why Auction Your Property Part 1

Yes this is a very good question.....

I have decided to answer this question over a series. I'm goingto breack it down into sections and go through all the advantages of auctioning your property.

So here we go.

The biggest and most important reason to auction your property is this.

Seller Does Not Pay Commission

You're probably going yea right......
Well it is true. But I'll back to that in a minute.

When selling your property you have to make some very important decisions. Decissions like, "do I sell the property privately" or "which estate agency do I use".

For those who choose to sell their property own their own is for one reason most of the time. They don't want to pay commission. I totally agree. Who wants to give away money that can very easily be yours.

Well there is an alternitive.

When you sell your property at auction you do not pay the commission. The commission is paid by the purchaser. It is as simple as that. But please not that the property has to sell under auction conditions. Meaning, The property has to be included in on the day of the auction and Purchasers have to have a chance to bid on the property.

Now there is an alternative to this. Some auction houses such as Dales Bros Allow for what is called pre-auction offers and post auction offers.

Pre-auction offers is an offer to purchase submitted before the auction. There are certain rules that apply to this though. Rules such as the offer will be a private treaty offer to purchase (I'll explain this at a later stage). The purchaser has to have their finances ready. The sale has to be concluded before the auction and there are no suspensive conditions allowed. (I'll explain suspensive condition at a later stage). The most imprtant thing is that the seller will then pay the commission. But Dales Bros works differently with the commission situation. What they do is ensure the offer that is submitted is a strong offer. What I mean by this is that the offer has to cover the commission for the seller. By doing this, in theory, The purchaser is paying the commission.

Post auction offers really work in the same way as a re-auction offer. So I won't bore you with the same story twice.

Well that is it for now. I hope this has helped you to understand property auction a bit better.

As usual, if you have any questions or concerns please drop me a comment and i will get back to you soon.

See you tomorrow for Part 2

Regards

Mornay