So why would I make such a comment like that; I mean, they’re happening everywhere, aren’t they?. They’re even on TV.
So let’s go back a bit. Can you remember back to when they were a rare happening. Some big house owned by the local rich family or the farm or antiques; that kind of thing.
Now it seems to be just about every three-bedroom homeowner is being convinced to sell that way.
So let’s look at what or who has driven this upsurge, and why they would have done it?
I like to go back to basics and ask the Question; Who Benefits? Because whoever benefits, you can bet they’re the ones driving the “A” truck, and are trying to get us all up on the tray
It’s the media barons folks … the major newspaper and TV owners have convinced the Real Estate Agents to push you into auctions, because it generates BIG ADVERTISING REVENUE.
Newspapers don’t make money out of the news. The NEWS is only the reason they can sell advertising and it is from advertising that they make a profit
The Real Estate bosses have fallen for their line hook line and sinker. Agents have become advertising salespeople for the newspapers.
So why does the big “A” appeal to the big real estate bosses?
1. It brings a sale process to an end with a definite date … the “A” date.
2. The agent doesn’t have to commit to an achievable sale price.
3. The normal sale process is hard work requiring a higher skill level.
4. The client pays all the advertising up front.
5. Advertising makes the Agency look big and successful, but with Client’s Money.
6. All the pressure is put on the client to sell.
7. Failed auctions don’t get advertised in the media
8. They earn commission from the newspapers for selling advertising for them.
It brings a sale process to an end with a definite date … the “A” date.
It sells or it doesn’t sell! Accordingly it’s relatively easy for the agency boss to estimate his income from a regular flow of auctions.
Private Treaty sales require individual inspections and negotiations and an end date is not easy to determine.
The agent doesn’t have to commit to an achievable sale price.
At the auction sales presentation, you the owner, would like to know ‘What Price” you will get for your property.
The answer is always,’THE MARKET.’ And of course, so the story goes, THE MARKET will usually recover the advertising expenses you must pay up front; especially for a beautiful house like yours.
The normal sale process is hard work requiring a higher skill level. The agent, therefore, does not have to give you a possible range, within which your achievable price will fall. By definition this allows the agency to employ people with high sell ‘the auction’ ability but reduced real estate experience.
The client pays all the advertising up front.
OH, did I mention that you now have to part with a Substantial Cheque of many thousands of dollars in order to promote your property. You will be presented with a well-prepared advertising campaign. Your only choice will be the ‘pink one’ or the ‘yellow one.’
That is the $7,000 one or the vastly superior $11,000 one. If your house is a high price ticket, you can double these costs.
Advertising makes the Agency look big and successful, but with Client’s Money.
OK, the campaign is off and running and you first advert appears in the Color Pages. Yes it is small, isn’t it? As a matter of fact the most dominant FEATURE on the page is the AGENCY’S NAME. Then, of course, we have the sales person’s photo, perpetuating the ‘cult of personality.’
Oh yes, then there is the picture of your house and a few lines of description in typeface you can just read. ‘Umm,’ you think, ‘maybe I should have gone for the bigger size ad.
Let’s move on to the day just before the auction, and when all your money has been spent. The agent and the auctioneer visit you and tell you that there has been a good response to the advertising. Of course, you don’t have a clue what quantifies as a ‘good response.’
‘We need to establish a Reserve Price” they continue. As someone once said, ‘please explain?’
Oh, it’s the minimum price you would accept! ‘But.’ you say, ‘I didn’t go to auction to get the MINIMUM PRICE, I want the MAXIMUM PRICE; what’s this minimum price business?’
‘Well,’ says the auction agent, ‘now that we have completed this big campaign for you,’ they continue, ‘you want a result don’t you, so let’s not send the people who turn up get away.’ ‘No,’ you should reply, ‘I don’t want any result, I want the best price plus my advertising cost back.’ Question! How well do you sleep that night?