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When it comes to selling a property, there’s more than one way to crack an egg.
Homes taken to auction are no longer so likely to sell under the hammer as the property market weakens, and sellers are turning to post-auction negotiations instead.
Some auctions are selling under the hammer while others pass in.Credit:Jason South
In the boom last year more than seven in 10 Melbourne auctions were successful but the auction clearance rate dropped to 52.9 per cent this June as buyers worried about interest rate rises and the prospect of price falls.
Buyers and sellers kept haggling and by eight weeks after auction day, the post-auction success rate was 72.2 per cent. On the other hand, more than a quarter of sellers were left without a deal by then.
Of the 1559 failed auctions in Melbourne in June, about two in five found a buyer within eight weeks.
More recently, the July clearance rate of 51.1 per cent rose to 63.6 per cent within four weeks.
It’s a sign of a growing gap between the expectations of buyers and a handful of vendors still hoping for last year’s prices.
Jellis Craig Northcote director Sam Rigopoulos sold two properties after auction last weekend. He said buyers may want to see that someone else is bidding before taking the plunge, while the challenge for vendors is making sure their price hopes are in line with what buyers will pay.
“With, obviously, our market normalising, the buyers are very conscious of seeing social proof. That just leads to that hesitancy,” he said.
“Everything is about expectations. The vendors who have high hopes of knocking it out of the park … they set themselves up for disappointment.
“Those who are happy to meet the market are moving their properties on a lot quicker.”
Sellers whose expectations are in line with buyers are more likely to strike a deal.Credit:Stephen McKenzie
He advised sellers the offers now might be better than those forthcoming in another month’s time – and he reminded cautious buyers these weaker market conditions are what they have been waiting for.
Melbourne home values fell another 1.2 per cent in August, CoreLogic figures show, and are 3.8 per cent lower over the past three months.
Prices are expected to keep falling as interest rates rise, and next week the Reserve Bank is tipped to lift the cash rate for a fifth straight month.
Rob and Heather Crowhurst sold their Cheltenham home of 22 years after auction in July, and despite the stress of the process, were happy with the result.
Rob Crowhurst’s Cheltenham home passed in at auction in July but sold within four days.Credit:Simon Schluter
Although no bidders raised their hands at auction, four offers were forthcoming afterwards and the home sold within four days.
“A lot of people don’t like to get into a bidding situation, especially now the market eased off,” said Mr Crowhurst, who is retired from the manufacturing industry.
“If someone started, it could have been different, but no one wanted to start.”
Their agent, Ray White Cheltenham director Kevin Chokshi, received one post-auction offer that was subject to finance.
Then more buyers wished to inspect the property the following Monday and Tuesday. Four offers were made, including one $50,000 above the reserve price without conditions attached.
Chokshi has noticed a fair few auctions passing in and selling after, but said the auction date creates a deadline, in a way the private treaty process does not.
“The auction is creating a trigger for them to go, ‘bang, let’s make an offer’,” he said.
Or, if it doesn’t sell soon after: “That should trigger a price change for the seller.”
Reside Real Estate senior sales consultant Nathan Gleeson said in the weakening market, some buyers are waiting to see what happens after a property passes in.
Others do not have their finance arranged and cannot bid under auction conditions, he said, as there is no cooling-off period for auction sales.
Or they may not want to be too quick to disclose their budget to a vendor, he said.
“Sometimes they are playing it a little bit too cool,” he said. “If there is one interested party, and no one [else] sticks their hand up, they won’t bid.”
Westpac senior economist Matthew Hassan said the rising cash rate had accelerated price declines that were already happening in Melbourne and Sydney due to stretched affordability and rising fixed mortgage rates.
He believes Melbourne is 20 to 30 per cent of the way through its market downturn, and has forecast a peak-to-trough decline of 18 per cent.
Hassan said post-auction sales showed there was still solid buyer demand for properties priced correctly.
“It may be an indication for sellers that are prepared to move on price, that they can clear the property,” he said.
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