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Why Auction A House - Pros and Cons

By Trish Willis | Member of the Property Institute of NZ (IPAC)

December 15, 2024 - Deciding whether to auction a house instead of other methods of sale such as selling by tender, negotiation, deadline treaty or priced, very much depends on the real estate agency, your property type, value, location and market conditions at that time.

The pros and cons below will help you decide whether selling by auction is right for you.

Other important factors in the success of an auction are your real estate agent's competence, the accuracy of the free market appraisal and the recommended sale price range. These are all things that have a direct impact on your result.

Starting a real estate campaign with an inaccurate price range can lead to a long drawn out and stressful experience so it's important to scrutinise a real estate appraisal thoroughly.

Get informed about real estate appraisals before you engage a real estate agent

If there are fewer buyers in the current market, how will your real estate agent reach more buyers? Do you need to target overseas buyers and therefore need an internationally focused real estate agent?

There are many questions to ask a real estate agent that are often overlooked, things like their auction success rates and how these are measured.

Learn about advertising, marketing and auction costs.

Pros of selling a house at auction

Buyer attraction: Some say they attract more buyers because people aren’t put off by an asking price.
Bidding wars: Auctions can achieve great prices due to excitement, competition and bidding wars managed well - it's an intense and emotive experience.
Maximum offers: Buyers are thinking about the maximum they can afford to pay rather than how low they can negotiate the price.
Focused buyers: High profile advertising and the fixed term can focus buyers on your property over others due to the deadline date.
The reserve: Buyers don’t know your auction reserve sale price.
Conditions free: Buyers cannot make conditional offers so the sale and purchase agreement contract is not subject to inspections or finance, however they can approach you to vary the terms of the auction or the settlement date. Lack of conditions can expedite a sale.
Sale completion: The winning bidder must complete the sale as it is legally binding.
No pressure to sell: If the property gets lower than expected auction bids the reserve price protects you.
Fast: Selling a house at auction is one of the quickest ways to sell property.
Serious bidders: Buyers have to do due diligence beforehand so there will only be serious buyers at the auction.

If you're unsure and need independent information about selling a house at auction send us your question in confidence or start a Live Chat now - it's a free service New Zealand-wide and we're here to help.

Cons of selling a house at auction

Highest price?: House auctions do not always achieve the highest price possible. Other methods of sale allowing for upward negotiation may get a higher price.
Privacy: Auctions are public and anyone can attend. There are other more private methods of sale, such as tender.
Extra cost: Anywhere from $400 to $1200 for the auctioneer and the focus on high profile marketing can be more costly.
Stressful: Auctions can be nerve wracking due to their fast pace and hype on the day.
Buyer deterrents: House auctions can rule out potential buyers who aren’t able to secure finance by auction day while some may be deterred due to the competitive nature of the bidding. Potential buyers tend to assume auctions will rise to a price beyond their means. Registering to attend may also put off some.
Cooling off: During the wait for auction day, buyers may find another house and quickly make an offer.
Regret: If your price only just makes it over the reserve price, you may be disappointed and by then it will be too late.
Buyer tactics: When bidding against each other, bidders will only bid enough to get higher which may not be the best price they were willing to pay.
Buyer bargain: Buyers have admitted they would have paid a much higher price for the home.
Failure to sell: Not every property will sell on auction day, although a sale is often negotiated shortly afterward.
Relisting experience: If your house doesn’t sell at auction and you need to relist it, you will be facing even more expenses.

If you feel like changing agencies, you are not obliged to re-sign with your current agency.

Find out about switching real estate agencies here.

If you're still unsure and need independent information about selling a house at auction send us your question in confidence or start a Live Chat now - it's a free service New Zealand-wide and we're here to help.

Wise Up NZ Awarded Most Reputable Property Advice Hub NZ 2021

Page updated December 15, 2024 by Trish Willis | Member of Property Institute of NZ (IPAC) & Awarded Property Advisor of the Year 2023.

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Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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