Challenges facing property auctioneers

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17 Jan 2013

Most auctioneers find that it is not difficult to get stock, however, getting a realistic reserve price can be a real challenge, according to an expert.

She points out that she was recently told that many sellers still see their buildings as 30 percent more valuable than the market will pay, while buyers at auctions tend to expect to make a purchase at 30 percent below market value.

Tanya Jovanovski, franchisee for Rawson Auctions in the Western Cape explains that many auctioneers face a dual challenge when it comes to auctioning a property.

On the one hand, sellers, despite much media coverage on the subject, still hold onto unrealistic prices and, despite counselling, they often refuse to set attainable reserve prices.

“In some cases we simply have to break off negotiations rather than to continue to allow them to hope for these unrealistic prices.”

On the other hand, many buyers attending auctions do so in the expectation of getting ludicrously low prices.

She points out that she was recently told that many sellers still see their buildings as 30 percent more valuable than the market will pay, while buyers at auctions tend to expect to make a purchase at 30 percent below market value.

One message that has not yet been assimilated by the public, says Jovanovski, is that reputable auctioneers are usually also exceptionally good valuers and their reserve prices often reflect the right value.

“On every property sale that we are involved in, we will research the sale of at least ten properties sold recently in the area and we will compare these with the national averages, the growth rates for the province as well as the country as a whole.”

She says they also try and assess the extra value given by special features, such as position and proximity to the major hubs and amenities. Taken together, these enable them to price very accurately.

“We therefore take on stock that we know we can sell and by this achieve a high success rate, with both the buyer and seller satisfied with the results.”

For a sale to go through, not only must the price be right, but, in addition, there has to be a demand for that sort of product in that area – and the owner should always allow the auctioneer to spend sufficient sums to advertise and publicise the property fully.

Most of these conditions are met when sales of repossessed properties are handled for the banks – and that is one reason why these attract buyers and usually go fast, she adds.

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