Honestly - if it’s not, it should be.
This one national trend has arguably caused the most damage to Australian Home Buyers. [More than tax concessions for investors? I’d pay that.]
For the most part auctions affect state capitals. During the COVID boom times - at the height of the madness - around 75–80% of homes going to auction were selling successfully in the major capital-city markets, with some cities and individual weeks pushing above 85–90%.
In regional areas, auctions were much less common but the fierce buyer competition was still a factor and in my humble opinion, that last boom is what has put us where we are now. With house prices way up in the stratosphere where buyers can hardly reach them!
What auctioning property does to buyers:
Auctions create emotional pressure
The competitive, public nature of an auction can push buyers into making decisions based on FOMO instead of what the property is worth - negating any prior research they might have done before arriving to the auction...Once bidding starts, Plan A goes out the window. This false sense of urgency can easily lead to Buyer Regret later on.They can encourage buyers to overpay
Auctions establish the price through competition rather than an independently determined value. Two or three highly motivated buyers can push a property well beyond what one rational buyer might otherwise have paid.They reduce the buyer's ability to negotiate or attach conditions
It’s the very definition of an auction. Buyers have to front up with their finance organised, due diligence sorted before they bid. Once the hammer falls, there is no cooling-off period, and the buyer can't subsequently negotiate the price based on defects or problems they've discovered.
Which brings me to Before You Bid - and similar online platforms - that sell/onsell pest and building inspection reports specifically for auction properties.
The way they promote the platform is via real estate agents who include the pest and building inspection as part of the marketing plan for the seller (Red Flag).
We’ve seen the back end of these platforms and everything about it is grubby:
The seller chooses the inspection provider and pays them (Red Flag).
Inspectors are encouraged by the platform to “race to the bottom” on price for their services (Red Flag).
The result of this system is that and prospective property purchasers get a watered down version of a report that tells them the bare minimum about the auction property (HUGE Red Flag).
So where do auctions stand now that the market has softened a little? Minus the bull, add some bear…where are all the auctioneers?
Data for the past 3 months shows that Sydney's auction market has been running at roughly 50% clearance, which is dramatically lower than it was and a huge change in market psychology. A clearance rate above about 70% is generally associated with a strong seller's market; once you're down around 50%, buyers have substantially more negotiating power.
Good for buyers.
