Cancel the auction!
And get a higher price for your home.
by Neil Jenman
READING TIME: 3.5 minutes.
It all looks so good in the beginning. The agent loves your home and is confident it can be sold for a huge price. Just like the one up the street where the owners got three hundred thousand dollars above their reserve price. Oh wow! It can happen to you too. Just choose the auction method because, according to the excited agent: “Auction is the way you get the best price.”
Yes, it seems so good. So, you sign on the line – and look forward to being real estate rich.
Fast forward a few weeks. It’s now a couple of days before the auction and you’re not feeling so good. That nice agent who made those wonderful promises has morphed into the bearer of constant bad news. Your once beautiful home now has many things wrong with it – according to the “feedback” from buyers.
As for the price, well, forget what was said a few weeks ago. The “market” has spoken, and the “market” is saying to reduce your “expectations”.
Of course, none of this is the agent’s fault. The agent is just “telling you what the market is saying.” It’s incredibly disappointing. The agent is now quoting hundreds of thousands of dollars less than a few weeks ago. How many times in the past few weeks have you heard the agent say the word “market”?
Your inner voice is whispering: “You’re being played for a sucker.”
Suddenly, you stop feeling disappointed. You feel angry. The only thing not going down is the agent’s commission.
You start to realise many things. You see what you didn’t see before. This is not about getting the best price, this is about a sale at any price. You can now see what you should have seen earlier – no matter what price your home sells for, the agent gets a huge commission. The agent has one goal – sell your home at ANY price.
You’re really thinking now. The agent – and perhaps the auctioneer – just had a meeting with you to discuss your reserve price (the lowest you’ll accept). You feel like a death row prisoner being visited by the warden prior to execution.
You are thinking: “Why are they trying to get me to lower my price, why aren’t they visiting the buyers to increase their price?” Because this is not about getting you the price you want. This is about getting the agents the sale they want – at any price.
Okay, you now have two choices: Drop your price drastically and sell your home at the auction. Or hold firm and your home won’t be sold. It will become what’s called “passed in”. It will be an “auction lemon”. Its value will be severely damaged.
Few properties are more scorned than failed auctions. If you think the agent gave you low offers before the auction, wait and see what happens if you don’t accept a low price at the auction. It gets worse after a failed auction, much worse. You are like a sick animal with buzzards circling.
But wait, there is a third option. You can CANCEL the auction. Oh sure, the agent won’t like it and you’ll be pressured to “go ahead”. But, remember, this is your home, you are the boss, you are in charge. Given that the agent is basically telling you that you will have to sell for a low price at the auction or see your home become an auction lemon, surely neither of those options are palatable to you. Nor should they be.
You can take control back. A cancelled auction gives the seller huge advantages. First, you avoid selling at a give-away price; second, you stop your home becoming a “failed auction” and, third – and perhaps most important – you get the chance to sell your home the way it should have been sold in the beginning which means you stand a much better chance of getting the very best price for it.
Even if the agent says there are two buyers ready to bid at the upcoming auction, you’re still better off cancelling the auction. You’re not cancelling the SALE, no matter what the agents might say. You are cancelling the method of sale. Those two buyers will still be around. Buyers don’t buy homes because of auctions; they buy homes because they like the homes. And, by now you have probably figured out that you’ll get a much better price if you have two or more buyers interested and you negotiate with them individually.
Here’s an example – and it’s based on exactly what was asked of an auction agent a few weeks ago. It was the night before the auction. The seller was hoping to get nine hundred thousand dollars for his home. The agent, who had initially said that $900,000 would be “easy” to achieve was now telling the owner that “the market is saying closer to $800,000”. The owner wanted to cancel but the agent said, “Don’t do that, I have got two buyers who are going to bid.”
The owner then asked this question: “Okay, if you have two buyers and one has a maximum price of $820,000 and the second has a maximum price of $900,000, when the bidding gets to $820,000 and the first bidder has reached their limit, the second bidder will then bid, say, $830,000 (maybe less), is that right?” The agent agreed that, yes, if the first buyer offered his limit of $820,000, the next bid from the second buyer would almost certainly be $830,000.
The seller – who had wised up considerably in the past few weeks – then asked the agent this great question. “If the bidding stops at $830,000 how do you get me the extra $70,000?”
The agent, realising things were looking bad (agents hate it when sellers acquire knowledge about real estate), said: “What do you mean – $830,000 will be the highest bid?” The savvy seller replied, “Yes, but if the buyer’s highest price is $900,000 and that buyer has just bid $830,000 and there are no more bidders, how can you get me the extra $70,000 that the buyer is willing to pay?”
The agent was sunk because the seller had discovered what many sellers never realise – the only person who always offers their highest price at a public auction is the second highest bidder. Most times, the highest bidder is willing to pay a lot more. Tens of thousands of dollars more, sometimes millions. Yes, the more expensive the home, the bigger the loss at auction!
The agent then said, “Look, I have another appointment, I have to go.”
Yes, and if you have an appointment with the financial executioner, sorry, the auctioneer – and you don’t like the way things have gone in the few weeks since you signed-up for auction, then do the right thing by yourself: CANCEL THE AUCTION.
So, what happens after you cancel the auction?
Well, unless the agent knows how to persuade buyers to pay you their maximum price which means you will truly be offered the highest market price, you should probably cancel the agreement with the agent too.
Find a better agent and get yourself a better price.
Sure, this might mean a bit more work and maybe a small amount of confrontation as you assert yourself and demand the best price. But surely tens of thousands of dollars – perhaps even hundreds of thousands of dollars – is worth standing up for yourself?
Your home is probably your biggest financial asset. If you let agents walk all over you then, sure, you are going to lose a lot of money.
Stand up for yourself, protect your asset and get a lot more money.
CANCEL THAT AUCTION. Now.
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