Monthly Archives

March 2019

What is a Multi-Offer?

Q: I put an offer on a property last week but was told that my offer was rejected in favour of one through another agent. Isn’t there some process to protect the buyer when two offers are received at the same time? Peter T.

A: This is what we call a multi-offer and the REINZ recommends a process to be followed in these cases. This process is intended to provide all interested parties with a fair opportunity to submit their best offer.

Firstly, your agent should advise you that you are in this situation and let you know how it will work, and have you sign a multi-offer form. For an agent to present you with a multi-offer form he MUST have more than one offer in writing. Signing the form protects you from being told that there is another offer on the table when there is not.

All offers must be presented to the seller at the same time, preferably by a neutral party such as an agency manager, so they can compare them and choose only ONE to either negotiate with, or to just sign and accept, so put your best foot forward right from the get go. Think about how much you want the property and how much it’s worth to you and base your offer on that.

Remember you are in a competitive situation: It’s like an auction but you don’t know where the competition is at and in most cases, you don’t have a chance to increase your offer – the best offer will win. This includes conditions as well – you should keep your offer as clean as possible so that is as attractive to the seller as possible.  Remember – there may not be a second chance!

No buyers at your auction?

Q: Our home goes to auction in another week. We’ve had lots of people through the open homes but our agent is saying that he doesn’t think he has anyone interested. How can this happen – if so many people see the advertising and come to the open home shouldn’t there be at least one buyer? Jodie R.

 

A: Excellent question Jodie! This is not that unusual –, especially in the current market. In past years we would expect one bidder for every 15 people through an open home, but those days seem to have gone, now we are sometimes getting lower numbers through open homes and not as many buyers on auction day.

There are a number of reasons for this. Sometimes, despite the marketing, we get the wrong buyers coming to view. We are often amazed when we talk to buyers and they say “oh no, that one’s not for me, we need four bedrooms, not three” when the property is clearly marketed as a 3-bedroom home. Or they say they can’t deal with stairs when the property is headlined as a “Two-story Town House in Double Grammar Zone”. So don’t be too worried, if your agent has done a good job you should have at least one buyer there, and if you have a good auctioneer all he needs is one buyer!

Of course remember that every home is different, and your home is not going to suit everyone. Some people can’t see past the color of the walls despite that being a simple fix. This is where you rely on your agent to encourage buyers and handle their objections.

We find that we get lots of neighbours through open homes. While they may not be the buyer, they could well know someone who is.

Finally, not everyone who comes through an open home is able to buy unconditionally at auction. Some of these potential buyers will have started to look for their new home while their property is still on the market, and others may be looking before they go on the market. In either case, they may not be able to manage bridging finance and are just looking to see if it sells at auction. If not then they will be able to make a conditional offer.

At the end of the day it’s really about numbers: The more people you get through your open homes the more likely it is to sell under the hammer. The main thing is, get a good agent and the whole process should not be a problem.

What’s Social Proof?

What’s Social Proof?

We are often asked about how auctions work, and what makes a good auction so thought we would share the following article that we wrote for another publication:

Have you ever wondered about the psychology of auctions? Have you heard of “social proof? If you understand it you can use it to your advantage.

If you attend any auction across Auckland there’s a good chance you’ll see the following scenario play out –

Auctioneer: “Who wants to open the bidding?”

Crowd: silence

Auctioneer: “Who wants to start it off!”

Crowd: silence

Auctioneer: “Surely you haven’t all come just to see me!”

Finally, someone calls out a bid, or the auctioneer makes a vendor bid, and all of a sudden there’s a flurry of hands in the air.

Auctions are a great example of ‘social proof’ – a psychological phenomenon where other people’s actions reinforce one’s own decisions. Imagine you’re heading out for breakfast and there’s two café’s side by side – one is empty, and the one next door is full. You are more likely to choose the busy one because the assumption is made that something must be wrong with the empty cafe. It’s the same as an auction – if nobody is bidding, it can sometimes (often subconsciously) make people question their own judgment. As soon as someone else has put their hand up, it provides validation that no: there’s nothing wrong with the property, and yes: other people do see value at that price thereby triggering the other potential buyers in the crowd to join in.

Social proof can go both ways. If there’s active bidding it can signal to others that the property must be desirable and it’s worth fighting for, often encouraging people to stretch beyond their original budget. But if there’s no bidding, it can sometimes result in a property being passed in, even though there are people in the crowd who have every intention of buying it. Without the social proof of competition they freeze up, second guess themselves and begin to have doubts. We’ve seen many properties pass in on a vendors bid, only to have multiple parties then go inside to negotiate against each other.

The moral of the story is don’t let other people’s lack of interest in a property put you off. If you like the property, you can afford it and you’ve done your due diligence, then go ahead and buy it!

Are Auctions Still Working?

With the ‘softening’ of the market we are often asked if auctions are still working. Or actually, people are often saying to us “auctions aren’t working now so we want to sell by negotiation, or with a price.”

This is absolutely not true. In our current market, an auction is still THE BEST WAY to sell your property.

There are several reasons for this, but let’s start with the facts: In Raywhite, over 70% of properties taken to auction sell, while across NZ only around 40% of properties sell when sold by private treaty (priced, by negotiation, tender etc.). In other words, you have almost twice the chance of selling when you go to auction as you do if you sell any other way.

Why is this? When a property is listed with a price or by negotiation, and a potential buyer sees it and quite likes it, there is no reason for them to take any action. With the slower market right now they know there is unlikely to be a queue of people lining up to make an offer. So they say to the agent “let me know if anyone is going to make an offer” and off they go to the next open home.

An auction, on the other hand, forces all interested parties to take action because there is a deadline.

At the end of the day, an auction still provides the vendor with all the benefits: you stay in control, there is a strong call to action/deadline, all bids are unconditional and the sale is final on the drop of the hammer and payment of the deposit.

If buyers are conditional (e.g. have to sell their home before buying) they will be at the auction hoping it won’t sell and ready to put in a conditional offer if the property doesn’t sell under the hammer.

Interestingly when the market turns from a seller’s market to a buyer’s market there are plenty of agents who just find auctions too much work, and too scary. After all, if it doesn’t sell under the hammer the agent is the one who gets the blame. It’s so much easier to hide behind a By Negotiation sale, hold endless open homes and blame the lack of activity on ‘the market’.

So, there you have it: Auctions are still working and working better than any other method of sale, regardless of the market.