Thursday, October 22, 2009

To Sell or To Auction?


Something I came across I thought might be of interest, it appears as though the auctioneers, have somewhat benefited from the recession. According to an online article from cyberprop.com; the auctioning off of residential homes have significantly increased since the start of the recession, and South Africa’s Auction Groups, are pushing hard to further increase their share.

The article extensively quotes Mike Greeff, CEO of Greeff Properties, who informs us that a favourite marketing tactic among the auctioneers, is to convey the idea that if you choose to purchase a property through them, you need not pay commission or deposit (provided you work through a company that will guarantee your deposit - and obviously a fee would then apply). He warns that the plain truth is that auctioneers do charge commission and that often it’s the seller who covers the marketing costs. “Commission is usually in the region of 10% - far higher than the fees charged by estate agencies.”

Greeff further warns that homes sold by auction, do in most cases go for 15 to 25% less than their true market value.

“Even in these tough times while the prices obtainable are up to 15% down on the peaks of late 2007, we are seeing that the prices achieved by the auctioneers are way below that which a reputable estate agency would manage to achieve within ten to twelve weeks of being awarded the mandate.”

Greeff also warns that those attending auctions do so in search of a bargain and that all too often they do get it, which isn’t in the best interest of the seller.

“The auctioneers target market, essentially covers those who are financially stressed and desperately in need of a quick sale – and in concluding a sale they are usually doing the seller a huge favour, but for the realised price.”

“It has to be recognised, however (and there are a number of examples of this) that there is no better way to obtain a fair market related price than by using a recognised estate agency. “The time, care and personal attention that a real estate agent gives every buyer, is a sure way to achieve a true and representative price for a residential property.”

“An auction is a quick-fix alternative which, while often essential, should only be used as a last resort. If a home does not sell on auction, the free market price seldom gets above the final bid price, which unfortunately becomes known to all, post auction,” says Greeff.

In the battle of the Auctioneers vs Estate Agents, it’s reasonable to assume that Greef may be somewhat bias towards the industry he represents, he does however raise some very valid points which if you are considering selling, it may be wise to take cognisance of.

Ernest Roper
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