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How auctions can benefit sellers in a buyer’s market

24 Jul 2017

In the wake of the country entering its second recession since 2009, consumer confidence continues to plummet - allowing those in the financial position to purchase property to place dramatic downward pressure on property prices.

Lazarus says an auction is not a suspensive sale or conditional, it should be transparent so that buyers can weigh up their options and decide on the spot. At the end of the auction, ‘on the fall of the hammer’ the deal is final and the proceeds are made available to the seller in a much shorter time.

The June FNB House Price Index reflected a -2.0% year-on-year rate of house price growth in May, after a revised -2.1% in April when adjusting for Consumer Price Index (CPI) inflation.

According to Roy Lazarus of Park Village Auctions (PVA), this means sellers are often faced with the decision to either stay put or accept offers that are lower than their intended selling price - perhaps even at a potential loss - if the sale comes down to negotiations with a buyer.

Lazarus says people looking to sell in a ‘buyer's market’ turn to auctions mainly because of the swift nature of the transaction - haggling is eliminated and assets are realised almost immediately. This brings the entire sales process to finality much quicker, without any suspensive conditions.

“It is a method of congregating all the buyers in one spot at one particular time without the inconvenience of buyers being brought one at a time over a period of months,” says Lazarus.

“Sellers are not responsible for any commissions, and there are no further interactions between buyer and seller after the sale because all conditions are stated upfront before the auction and have to be abided with.”

Lazarus says an auction is not a suspensive sale or conditional, it should be transparent so that buyers can weigh up their options and decide on the spot. At the end of the auction, ‘on the fall of the hammer’ the deal is final and the proceeds are made available to the seller in a much shorter time.

However, Lazarus says while auctions are advantageous for sellers in many ways, factors such a property’s location will still influence how the auction performs.

“Buyers will need to do their homework ahead of time and have an indication of what similar properties fetch. It is also important for sellers to set a reasonable, market-related reserve price,” he says. 

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