Never Sell Your Home at Auction! An Article by Neil Jenman

February 5, 2024

Never Sell Your Home at Auction! An Article by Neil Jenman

Here's another article from Neil Jenman about Auctions- a must read if you're thinking of selling!

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Reason 60

The Popularity Myth Peer Pressure and The Dark Side

One of the biggest real estate myths is that auctions are “popular”. It is agents and their zest to make sales with less effort that leads to an increase in auctions.There is tremendous peer pressure for agents to push auctions. Franchise networks push offices to do more auctions. Agency managers push salespeople to sign-up sellers for auction. The pitch is always: “Auctions are better for us, get more auctions.”Even when agents have personal experience that auctions are wrong, they still push auctions.Nancy grew up in Indonesia. When she migrated to Australia, she found a unit in the Sydney suburb of Kingsgrove. It was being auctioned. She asked the agent to explain the auction process. The agent said the highest bidder gets to buy the property – provided the highest bid is above the sellers’ reserve price.Nancy wanted to pay $750,000. When she arrived at the auction, she showed the agent her cheque for $75,000 being 10 per cent of her best price. The auction began with a bid of $650,000. It rose in bid of $10,000 each. When the bidding reached $680,000 the auctioneer yelled, “It’s on the market, going to be sold.”The bids slowed to $5,000 amounts and then, when it hit $700,000, it stopped. Silence. The auctioneer said, “Can I see another thousand dollars anywhere?” Nancy raised her hand. The auctioneer yelled, “Seven hundred and one thousand dollars. Thank you, madam.”A few seconds later someone else bid $702,000. The auctioneer asked Nancy if she wanted to bid again. She nodded and the auctioneer yelled: “The bid is with you at seven hundred and three thousand dollars. Any more bids? For the first time. For the second time. For the third and final time, it’s going to be sold.” He pointed to Nancy, “Sold to you at $703,000!” Nancy was in shock. She had told the agent she wanted to pay $750,000. She had shown him her cheque for $75,000. And yet, she bought the apartment for $703,000, a whopping $47,000 below her highest price. She didn’t even ask for a discount.The owners were smiling; they got $23,000 above their ‘reserve’ of $680,000. “I felt sorry for them,” Nancy said, “They missed out on $43,000.”Today Nancy works in real estate. And yes, she often suggests home-owners sell by auction. As she is expected to do. And then there’s Stephen. When he started in real estate, Stephen was determined to do the right thing. He worked in an office where the manager supported his ethical desire. But now Stephen works in a franchised office. He’s instructed to push auctions. He asks all sellers to fork-out $5,000 in non-refundable advertising costs. Stephen has crossed to the “dark side”. And he knows it. He told me that – for sellers who come to him “from Jenman”, he’d agree to “treat them ethically”. I thanked him. But then I said, “Stephen, why don’t you treat all your sellers ethically like when you started in real estate?”It’s called peer pressure. In real estate, agents do what their colleagues expect them to do – and that’s whatever’s best for agents not sellers. As Michael Kies, Australia’s best real estate trainer explains: “Today’s agents are addicted to placing their own interests first.”

- Neil Jenman

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