9 Reasons Why Auctions Get Lower Prices

Despite the boom in many areas, almost 80% of home sellers are turning their backs on auctions and benefiting. But there are still many sellers who don’t realise, until it’s too late, what happens to them at auction.

If someone is trying to talk you into selling by auction, then before you sign anything, read the following nine reasons why auctions will NOT get you the highest price for your home.

1 Starting Price:

One of the basic principles of price negotiation is to ALWAYS START HIGH. It seems as if the price goes up at auctions, but that’s only because it starts low. When you start low, you can get stuck low.

2. Reserve Price

This is the lowest price a seller is prepared to accept. There is no procedure at an auction for determining the highest price the buyer will pay. Only the highest price of the losing buyers may be known because they stop bidding once they reach their limit. But the buyer who is the highest bidder often buys at less than his or her limit.

3. Repels Buyers

Research shows that more than 90% of buyers do not like auctions. The highest paying buyers may avoid the auction.

4. Inconvenient

One of the basic rules of marketing is make it easy for people to buy. Auctions do not make it easy. They make it hard.

5. Bargain Hunters

Investors, developers and property dealers often buy at auction because they all know that auctions are one of the best places to find cheap deals. But they almost NEVER sell at auction. You will not find many real estate agents selling their home at auction either.

6. Comparative

By making the negotiation public instead of private, buyers have an advantage over the seller. Instead of having to offer their highest price to win the auction, buyers only have to outbid the buyer below them.

7. Deception

To persuade sellers to auction their home, agents will talk about high prices. And then to get buyers to come to the auction, the same agents will talk about low prices. The sellers end up selling for less than they were told they could get, and the buyers often end up paying more than they were told they would pay.

8. Sells to the Wrong Market

To attract buyers, agents will market the home by advertising it at a low price, much lower than what the seller will sell for. This attracts buyers who want to buy at the low price. The agent will then say to the sellers, “This is what the market is telling us.”

9. Failed Auctions

When a home does not sell at auction it is labelled a failure and buyers will offer lower prices. They are easy prey for bargain hunters. 

These are just some of the seasons why we believe auctions get lower prices.

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