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setting auction reserve price Melbourne

Discussion in 'The Buying & Selling Process' started by Perthguy, 20th Nov, 2015.

  1. Perthguy

    Perthguy Well-Known Member

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    Could any locals please give me some advice on playing the auction game in Melbourne?

    Say we want $700k for our house. The agent knows this and agrees. Well, he wants us to set the reserve at $620k with the assurance that he won't put it on the market until the price has well and truly passed the reserve price. I don't understand this.

    If we give him a $620k reserve and he puts it on the market at, say $680k and there are no more bids, then its over. We would be selling too low.

    If our absolute lowest price is $700k then that should be the reserve. But agent is saying that if the reserve is too high it won't be a good auction and we will just piss off our buyers.

    Is this true? Is lowballing the reserve a good auction strategy, a Melbourne thing or do we just have a dud agent?

    I am feeling very confused and stressed about the whole process. My instinct is to set the reserve at $700k. But I don't want to stuff up the auction. I have no idea what to do.
     
  2. Esel

    Esel Well-Known Member

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    What has the agent been telling you about the likely sale price during the campaign?

    Ive had a couple of friends who have sold recently and in both cases the agent tried to get them to lower their reserve shortly beforw the auction. Im guessing the agents just want a sale.
     
  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    Yes, this.

    Agent is saying that he does not have any $700K buyers for your property and he does not want to have a failed auction.
     
  4. The Y-man

    The Y-man Moderator Staff Member

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    What price range has the property been advertised at?

    The Y-man
     
  5. Perthguy

    Perthguy Well-Known Member

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    Nothing. I know every property that has sold in the area for the last 6 months and I am basing my price on that.
     
  6. Perthguy

    Perthguy Well-Known Member

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    I get the impression this is all about telling the next vendors who want to list with him that he sold this place $100k over the reserve. He has told us all his recent sales and how much above the reserve they sold for.
     
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  7. Perthguy

    Perthguy Well-Known Member

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    540 to 590
     
  8. The Y-man

    The Y-man Moderator Staff Member

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    That would put general reserve expectations at around $640~650k. Any higher than that and I'd be calling underquoting as a buyer.

    The Y-man
     
  9. Perthguy

    Perthguy Well-Known Member

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    In the area, every potential development site is selling for 20%+ above the top end of the list range at auction. The agent has known our bottom line since day 1 and advised us to list at that price. I don't agree but it is the way that properties are priced in the area, so what can I do about it? I reckon Melbourne is the underquoting capital of Australia.
     
  10. The Y-man

    The Y-man Moderator Staff Member

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    Yeah, that's one sus agent!

    The Y-man
     
  11. Perthguy

    Perthguy Well-Known Member

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    Ok, I have worked out where I am going wrong. All I have access to is the list price and the sale price. I don't have access to what happened at the auction. Example: place around the corner listed for 700 to 770 and sold for over 1 million. I don't know at what price it went on the market.

    For this auction then, it would reasonably be expected that we go on the market at around 650 with the hope it sells for over 700.

    That's all good but it feels like a gamble to me to go on the market at 50k less than I want.
     
  12. Perthguy

    Perthguy Well-Known Member

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    Dam. I am afraid you are right. I picked him because he gets the results in the area. Now I know how... :rolleyes:
     
  13. melbz

    melbz Member

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    Good luck with the campaign Perth guy!! And yes, Melbourne is the underquoting capital of Australia. Especially in the eastern suburbs I think.
     
  14. Perthguy

    Perthguy Well-Known Member

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    Cheers @melbz. Well, the auction is today, so I just have to decide if I do what I think is right or do what is expected of me. Considering that decision could cost up to 50k, I am feeling the pressure.
     
  15. Bayview

    Bayview Well-Known Member

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    The reserve is the price that YOU want for it.

    The lower price being quoted by the agent is the one he wants you to set it at for a quick and guaranteed sale.

    If he sets the reserve at $620k, then once the figure hits that point, it is on the market, and can be sold at that figure.:eek:

    It is a common practice in Melb for auctions to be marketed with a suggested selling range below the reserve (the reserve is not disclosed until the auction).

    The theory is to stimulate interest and drum up competition and "then let the market decide what it's worth"

    This theory is great for a very high demand property, but hardly ever works for one that isn't.
     
  16. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Good luck today. I personally would set it at $700k if that is the lowest you want to go.
    If someone offered you $650k today before auction would you take it? If not then go for the reserve of 700k but be aware that you might not achieve it.
     
  17. The Y-man

    The Y-man Moderator Staff Member

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    @Perthguy all the best for today!

    To others, it might be a good insight on selecting agents and auctioneers in Melb.

    Some of the better auctioneers we've had have asked us to give them a reserve in an envelope, they put it in there pocket and do not look at it at all - they then come in to consult when the bidding slows down on whether to declare on market, declare "little more to go" and/or pass in.

    The Y-man
     
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  18. Perthguy

    Perthguy Well-Known Member

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    We did get an offer close to that and knocked it back. Even properties in the slummy suburb next door sell for more than that.

    A good thing for us is that a near identical property is up for auction just around the corner, half an hour before ours. We will go to that first and see where the market is at.
     
  19. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I consider it too risky then. I like @y-man idea of writing it but not telling the auctioneer
     
  20. Scott No Mates

    Scott No Mates Well-Known Member

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    Set your reserve where you're happy with the outcome, anything above is a bonus.

    By all means put it in a sealed envelope.

    If you set the reserve low the property can sell at that price. You can come down during negotiations with the highest bidder you can't go up.

    Good luck. Let us know what pans out
     
    MTR likes this.