An Auckland real estate agent says his vendors are bringing realism back to the auction market by disclosing the reserve price – before it goes under the hammer.
Ray White agent Ken Choong, says that marketing 540 Mt Eden Road, Mount Eden with a disclosed reserve is a first for him.
“This in itself is pretty unique. And the level of disclosed reserve is 20 per cent below CV reserve- that's $2.1 million while the land value alone is $2.4 million.”
Choong says the up-front owners are very serious, and just want to sell their former home and professional office, currently rented to a charity and in immaculate condition.
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The property, a former professional rooms, is on busy Mount Eden road. Photo / Supplied
He adds that the more than 100-year-old villa is in a very tidy condition, so unlikely to be bowled as it is in a mixed-use zone that has unique heritage overlay.
“The owners wanted full transparency, but a $1 reserve auction would cause too much anxiety, they weren’t comfortable doing that.
“This is a strategy to attract more bidders, who see the value and the possibility to get a bargain.”
With a mixed use zone and heritage overlay, the property is attractive to home buyers or businesses. Photo / Supplied
Remuera Ray White agent Steve Koerber has used this strategy for auctions before, and says it is particularly effective for certain types of properties such as those which are not the easiest to sell or ones with a CV that is very high and doesn’t reflect the true value of the property.
“The vendor has to be open minded and realistic. It works for buyers. If they’ve seen the CV is much higher they won’t call, but when they see that [reserve] price, they will call.”
Three weeks ago, Koerber marketed a property at 27 Wiles Avenue, Remuera, just off highly desirable Arney Road, with a disclosed auction price guide of mid to high $2 millions. It had a CV of $2.125 million.
“We strongly wrote in the copy that it had a price guide so you were effectively saying to people this is below $3 million.
A house at Wiles Avenue, just off Remuera’s Arney Road, sold for $2.75 million after a reserve price was marketed before auction. Photo / Supplied
“In the marketing and photos it looked like a $5 million home, so we needed to bracket it. If you saw it from the street it looked more like low $2 millions, so we had to do something different.
“The outcome was fantastic, we had three bidders and it sold for $2.75 million, the upper end of the bracket.”
Koerber admits that while he’s done a couple of no-reserve auctions that sold for “what they were worth”, he feels it is a risky strategy as it often attracts “bottom-feeders and bargain hunters” and may scare off a quality buyer.
“People think ‘there’s something wrong’, it puts them off.”
Ray White chief operating officer Daniel Coulson, who will call the December 16 auction at 540 Mt Eden Road, says that choosing to disclose is not an indicator of the current market, but more vendor driven.
“The purpose is to send a clear message that the buyer is motivated and there’s a deal to be done. The benefit to the buyers is that they are very clear that the owner is realistic.
“I’d not recommend it for every property, but it’s about getting the deal done.”
A $1 reserve for a house at 14 Landette Road, Mangere attracted 39 registered bidders and sold for $600,000, $70,000 above CV. Photo / Supplied
The braver auction strategy – a $1 reserve - worked out in July for Ray White agent Pat Lapalapa. He sold a house at 14 Landette Road, in Manurewa, with a $1 reserve for $600,000, $70,000 above the 2017 CV. The strategy attracted over 40 bidders after 100 parties viewed the house with three offers in the first 24 hours (and a cheeky offer of $3 on Instagram).
"It removes vendor price expectations barrier. Some people don't even turn up to the auction, yet they could have been successful and bid something the vendor would have accepted," Lapalapa said.
The crowds at a $1 reserve auction also benefit other properties auctioned on the same night as under-bidders turning their attention to others: a property at 1 Iris Place, Clendon Park got $605,000, while 155A Russell Rd, Manurewa achieved $671,000.
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