Auctions vs conventional selling

Auctions vs conventional selling

Which is the better option to sell your residential property?

One of the main topics currently being discussed in the property market is, "is it better to buy at auctions or through estate agents?"

The consensus of opinion among the prominent estate agents Moneyweb contacted was, commercial properties should be entrusted to auctioneers, but not residential properties.

The auctioneers contacted agree with them about commercial properties, all, however, feel they have a better chance of selling residential properties – and faster.

Some auctioneers feel auctioning is slowly gaining market share, although there aren’t any figures to prove their view.

All property transactions must be registered in the Deeds Registry, run by the Department of Rural Development and Land Reform. But all the Deeds Register web page states is:
"By September 2010 1.44m government-subsidised properties were formally registered on the Deeds Registry. This comprises about 24% of all formally registered residential properties."

That can be interpreted to mean just more than 4.3m properties were registered in that period.

Lew Geffen, chairman of Sotheby's International Realty, South Africa owns a conventional real estate business and a separate auction business, believes “the sale of residential property by auction cannot compete with sales by real estate companies.

“A property usually goes to auction when the seller is desperate. If the seller does not accept the offer it will be a failed auction.

“There is no stigma if a residential property has show day after show day.”

He describes the auction platform as “great for commercial properties. I believe commercial properties genuinely take less time to be sold by way of auction.

“In the present market, an average residential property takes about four months to sell. It is false to claim that auction properties take only 30 days to sell.”

Ronald Ennik, CEO of luxury homes marketer Ennik Estates, who helped grow the Pam Golding brand to one of the top positions at the luxury end of the Johannesburg homes market, agrees with Geffen: “the auction system is better suited to the commercial property sector, where it attracts less negative perception than in the residential sector.

“In the residential sector it is perceived as a last resort by a seller who has his back to the wall.”
Bill Hartard, a partner in Segoale Property Mart, who was chairman of the SA Institute of Auctioneers (Saia) for 14 years, and who now specialises in auctioning residential properties, takes a more holistic view.
He says it will take a long time before auctioneers can compete with estate agents on level terms, because "there are about 37 000 registered estate agents, and 160 auctioneers that are registered with Saia.
"If there is no urgency to sell it is in sellers’ interest to negotiate sales through estate agents who can include suspensive conditions, such as, 'subject to the buyer selling his own property,’ as well as arranging bond financing.

"Where the need to sell is urgent, sellers should take the auction route, where a sale can be achieved within about 21 days, with no suspensive conditions.

“This applies particularly to free standing mansions or luxury penthouses on the Atlantic Seaboard.
“Like pieces of art, they’re worth only what someone is prepared to pay for them. Which can be established only on auction."

As far as costs are concerned, estate agents pay for advertising properties, and sellers for advertising sales by auction, and the auction costs.

Rael Levitt, CEO of Auction Alliance, arguably the biggest auctioneers in SA, says: “real estate agencies may leave you waiting for prospective buyers to view your property and put in an offer to purchase.

“If a property takes a long time to generate interest when mandated to real estate agents the seller may, in desperation, be forced to accept the first offer - even if it's low.

“With auctions it can take between eight and ten weeks from the instruction to sell to the registered
transfer of a property or asset.

"The deal is done when the hammer falls: no protracted negotiations, no suspensive clauses or intermediaries."

“The seller sets a reserve price. There's no ceiling on the price, which often results in higher final prices than more traditional selling methods.

“Only serious buyers bid at auctions. If there's no sale, there's no charge, and the buyer, not the seller covers the auctioneer's commission.”

“Auctions also work for buyers. It takes three and four weeks to register the transfer of an auctioned property or asset.

"Auctions invariably secure realistic market price, and there's always the chance of a bargain."
Park Village Auctions’ director Roy Lazarus says, “auctions are less time consuming, there’s only one show day, where prospective buyers aren’t expected to make any offers.

Auctions create excitement. Buyers often pay more than they intended to.

“People often think the seller (by auction) is insolvent. That’s a complete misconception.”


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Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!