Quite often I receive questions regarding this sale strategy that the team at Clark Real Estate so often preach. The idea of a Silent Auction is something that you don’t hear often with most real estates, though this is because they might not know so much about it. I have written this blog to help you understand the ‘Silent Auction’ and answer some of those questions for you.
What is a Silent Auction?
Let’s get straight to the point. A silent auction is the process in which buyers will meet with their agent and place their best offer on a property without publicly divulging the details of their offer to other buyers. It’s super simple and super effective.
This sale strategy brings the sellers the best figure. Buyers are encouraged to place their best offer, without any buyers knowing each other’s offers which guarantees the seller getting the maximum price.
What are the downsides to a traditional auction?
Regular auctions continue to prove ineffective. Over the past few months we have seen the clearance rate for auctions throughout Brisbane raise up to approximately 40% and dip all the way down to 10%. Could you imagine if 100 properties went up for auction one day and then 90 of those 100 did not sell? It’s outrageous. I know I wouldn’t be going for a traditional auction with such a dismal success rate.
For an auction to be successful it requires two or more bidders on the day. The intent of the seller is that an auction will generate the competition between buyers and push the price up. This is true to a point. The transparency of the public auction process dictates that bidders will only bid one increment more than what they have to, to in order to secure the property. Therefore the property is not being sold to the highest price the buyer is willing to pay but rather one measure higher than their opponent.
What are the benefits for going silent?
Clark real Estate’s Principal, Mario Lattanzi, told Sky News “The real benefit is from the seller’s perspective.”
You know what price you want for the property, and the buyers are in a position where they know other parties are putting in offers but they don’t know the price of their opponent’s offer. Every buyer will want to put the most they can afford down to have the highest chance of being able to get to their new dream home, investment or project.
As an example, in a Silent Auction sale, two competing bids were negotiated, one at $850,000 and $890,000 respectively. In a public auction, where both bids would have been public, the property would more likely to have been sold at just $851,000 as bids would have slowed down to $1,000 increments.
When negotiation with Buyers Mario explained, “You need to ask yourself what is this property worth to you and what is the highest price you are prepared to pay for the property? To the point where if someone offers a dollar more, you’re happy for them to have it.”
But as a buyer, how do I know what I am bidding against?
The truth of the matter is that you don’t know and won’t know. This isn’t such a bad thing, it just means you must do your homework on the property and find an agent you can trust to guide you through the process.
Nicole Jacobs, a Victorian Real Estate Agent and buyers advocate told Sky News, “It is difficult as a buyer; you really have to do your homework. You have to have a lot of confidence in the selling agent. You have to trust your agent and say how much would you be willing to pay and walk away from.” Nicole added.
“If it is the right property for you, it comes down to what you are prepared to pay for that property.”
What if it doesn’t sell?
Mario Lattanzi suggests that if the bids do not reach the desired mark in a Silent Auction, the seller has a much better prospect of selling their property than if it fails at auction.
“If it doesn’t sell, there’s a private forum which gives the seller the negotiation ability to put the property to sell for private treaty, at a price that allows us to test the market in a different selling method.”