Nicola Kelland - Auction prices

If you have been attending auctions in the past 12 months intent on purchasing either a new home or your first home, then you would probably have experienced missing out on your dream property when it sold for a lot more than you expected or even the real estate salesperson indicated. So you might be asking yourself, why?

I think there are two different scenarios at play here. One role of the salesperson when auctioning a property is to seek feedback from the market, in other words potential purchasers. While the salesperson would have appraised the property for the owner before taking it to the market, appraisals are not always foolproof. Even registered valuations can be way out on market price. The market price for a property is determined by what a purchaser is prepared to pay for the property in a situation of a willing seller and a willing buyer. For obvious reasons, purchasers often don’t tell salespeople what they are prepared to pay at the auction, so the feedback is not always accurate. As a buyer, don’t just rely on the market feedback, ask the salesperson for some good comparable sales statistics, drive around and compare those properties yourself. It may not be foolproof, but it will give you some facts to enable you to form your own opinion.

Secondly, you can’t factor in the emotional appeal a property has when appraising a property. There are definitely homes that just have that X factor and attract a large number of potential purchasers. These properties will often sell well above the appraised value or reserve, due to the number of potential purchasers and the determination of these purchasers to own the property. Obviously for the vendor, this is an ideal result, but as a consequence there are many disappointed purchasers. I have seen an auction of a property achieve over $650,000 above the reserve price, this was despite the reserve being above the appraised value and a registered valuation. In the end there were 2 very determined purchasers wanting that property which was particularly attractive and emotive. The result was far in excess of any recent sales statistics and broke new ground for sales in the area. It just goes to show that the emotional feel of the property is very valuable.