The Block auction shock: When to fire your real estate agent
The Block: Treechange auctions dished up plenty of surprises - and a few valuable lessons for home sellers.
The numbers around this year's batch of The Block auctions say it all.
Five homes. Price expectations of $4 million-plus. Two houses passed in. Three purchased by a single buyer.
It's hardly the stuff of a standard suburban auction.
The real eyebrow-raiser is that serial Block buyer Danny Willis was the sole buyer of all three properties that sold under the hammer.
There's no question about Willis's financial capability. He reportedly sold his IT business in 2020 for $162 million.
The question is, would these homes have sold if Willis hadn't turned up?
With so much controversy swirling, it's worth a look at some of the basics of sale by auction.
Who does the real estate agent work for?
Real estate agents face fiduciary and statutory duties including a duty to act in the best interest of their client.
This should mean aiming to score the best possible price for a property. But for the agent, a sure sale can be more compelling than holding out for a higher price, which may produce only a small uptick in sales commission.
In a falling market that's not necessarily a bad thing for sellers.
Home values have dropped 4.1% nationally in the past three months according to CoreLogic. The longer a home lingers on the market, the greater the risk it could be worth even less in a month's time.
What's to stop my agent overquoting?
Agents face serious penalties for obvious misquoting. In Victoria, it's illegal for an agent to advise buyers of a price below the seller's auction reserve price.
In Queensland, agents are completely banned from giving price estimates on homes going to auction.
However, in the cut and thrust of an auction, it can be near-impossible to accurately predict what a property will sell for.
Who, for example, picked that Omar and Oz would achieve a sale price topping $5.6 million for House 5, and claim the biggest payday in The Block's history?
What if I want to change agents?
Sellers and agents typically enter into an 'agency agreement' or sales authority'. This is a legally binding contract that often gives the agent exclusive rights to sell your home.
If you're not happy with the agent's efforts, you need to give the agent notice in writing. In Victoria, any changes to the arrangement must be made in writing on all copies of the sales authority, and initialled by both you and the agent.
Unless the agreement is formally ended, you could be liable for paying the agent selling commission even if you find a buyer yourself.
How to set a reserve price at auction?
Angus Raine, executive chairman of Raine and Horne, explains, "The reserve price is generally set on auction day or the day before, and establishes a minimum price against which buyers will bid. The reserve should be confirmed in writing, and reflect the property's current market value."
The reserve price is not set in stone. If the bidding is low, the auctioneer will have a quiet word with the seller to ask if they'll adjust the reserve.
If a property is passed in, meaning the highest bid hasn't met the reserve price, the agent will negotiate with any genuine buyers following the auction.
Raine cautions, "Sellers who are willing to adjust their reserve during bidding are more likely to achieve a suitable outcome.
"As a rule of thumb, a property seldom sells for a price higher than what it was passed in for."
Know the rules
One thing The Block auctions made clear is that buyers don't value the blood, sweat and tears you've put into your home. And in today's quieter market, the skills of an experienced selling agent can really shine through.
Ask friends, family and workmates for referrals. Scrutinise the agency contract you're asked to sign - and if anything is unclear talk to your solicitor. Keep written notes of conversations with the agent especially around costs and commission, in case any disagreements arise.
Above all, bear in mind that an auction does not guarantee a sale. The week The Block homes went under the hammer, CoreLogic reported an auction clearance rate of 63.7% in Melbourne. That's less than two out of three homes successfully sold at auction. Maybe the remaining one-third just needed Danny Wallis to show up.
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