| AUCTIONS GET THE SECOND BEST PRICE | E-mail | |
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It's basic mathematics.
As accountant Ian Eldershaw explains, "Auctions get you second best - never the best. The second best price level is set by the second best bidder. An auction stops when the second best bidder drops out and you never know how much you could have really got. For instance, imagine two people called Ken and Helen both want to buy your home. Ken is prepared to pay $340,000 and Helen is prepared to pay $320,000. But what will happen in an auction? You'll get a little over $320,000. When Helen stops bidding at $320,000, Ken will bid $321,000. And the bidding stops! The auction is over. It's an anti-climax. Ken grins in triumph because he paid $19,000 less than he expected. You missed out on $19,000. You got second best." Ian points out that a skilled negotiator would have got the best price of $340,000. To get the best price, each buyer would have been asked to declare their best price one time and one time only. Helen would have declared $320,000. And because Ken would not have known Helen's price, he would have no option but to declare his best price. The big trouble with auctions, for sellers, is that the prices being offered are done in public. Every buyer knows exactly what other buyers are offering. Everyone knows the sellers' lowest price, but no one knows the buyers' highest prices. This is like playing cards where one person has to turn the cards face up and the others are allowed to keep them face down. The people who see all the cards have a huge advantage. Marilu Hurt McCarty, Professor of Economics at Georgia University, says that when bidding is transparent - meaning that each bidder can see what other bidders are offering - buyers hold their bids below what they are prepared to pay. This means they are "paying less to the sellers". And this is why auctions do not get the best price, they get the second best price. But still, thousands of sellers are tricked by the one-sided arguments of the auction agents. David Slade is a real estate agent in Timaru, New Zealand. His agency was considered for the sale of a prime lake-front site on Lake Tekapo. David advised against auction, but he was not selected as the agent. The sellers signed up for an auction with a large real estate network. At the auction, the bidding commenced low, as it always does, and then, when it reached $192,000, it stalled. No further bids. The property was sold. A newspaper wrote a story about the success of this auction with the agent boasting, "It's a lot of money." Yes, it was a lot of money. But, not in the way that most readers were led to believe. The buyer had been prepared to pay $315,000. But the second highest buyer had only been prepared to pay $191,000. And so the sellers received $192,000, which was one thousand dollars above the second best price. Had they followed the advice of David Slade and not chosen auction, they would have received an extra $123,000 - from the same buyer. They would have received the best price, not the second best price. Auctions don't get the best price. They get the second best price.
This is an extract from the book, Don't Sign Anything! by Neil Jenman.
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Selling a house is a very stressful experience, especially when the market is so unpredictable. I would like to thank you again Jason for making it a less stressful experience for us. You showed us commitment and ongoing confidence that the house would sell. You also kept us up to date each week with what was happening, who was coming through and the comments that were being made about the house. You did not push us into making any changes but gave us valuable advice regarding improving the way we could sell. Thank you for your perseverance and ongoing commitment. We will recommend you as a trusting agent. Trish & Dave Mallabar - Figtree |
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Our dealings with Jason Hines were nothing short of excellent. Their personal manner, professionalism, punctuality and reliability made him an absolute pleasure to deal with, and we have only praise for his work ethic in every respect. We would personally like to thank all the staff at Peter FitzGerald Real Estate for their hard work and commitment to achieving our desired outcome, and for making our selling experience as easy and enjoyable as possible. They will always be our first point of call for any real estate dealings we have in the future. Selling a house is a very stressful experience, especially when the market is so unpredictable. I would like to thank you for making it a less stressful experience for us. You showed us commitment and ongoing confidence that the house would sell. You also kept us up to date each week with what was happening, who was coming through and the comments that were being made about the house. You did not push us into making any changes but gave us valuable advice regarding improving the way we could sell. Thank you for your perseverance and ongoing commitment. We will recommend you as a trusting agent. Your enthusiasm, professionalism and regular communications were excellent and we thankyou for working on our behalf. The skills you possess were of notable credit and assisted us greatly in being able to realise a more than acceptable outcome. We wish to especially thank Peter FitzGerald Real Estate for the courteous and efficient way that they marketed and sold our property and for their attention to detail. We would have no hesitation in recommending them to any future sellers. In my dealing with Peter FitzGerald Real Estate, I have found them to be helpful and professional. Despite living 5 hrs away our enquiries were always answered promptly with nothing being too much trouble. The stress of selling a property was eliminated through their efficient work practices. My mothers home in Mt St Thomas sold in days and at the full price. We want to thank Peter FitzGerald Real Estate for selling our family's home. We appreciated your appraisal of the house and your weekly contacts updating us on how things were going while the house was being sold. The integrity of the staff shone through in all our dealings and we thank you for giving us outstanding service. We wish to express how extremely impressed we were by the no fuss, honest and professional service provided by Peter FitzGerald Real Estate. The sale price achieved was above our expectations and the property was sold within days of being put on the market. I would just like to thank the team for an exceptional job in selling my 'not so easy to sell' home unit in an exceptionally tough real estate market. The team put in 100% effort, they kept me constantly updated and informed throughout the whole process and were always confident of getting me the top result, even if I wasn't. The final price exceeded my expectations... I was actually prepared to take less. I had it listed with an agent previously, after being charged over $600.00 for advertising, nothing happened. As soon as I switched to PFRE, things started happening, the team sold my unit and the only payment was they're reasonable agent's fee, which in this case they earned every cent. Once again, many thanks for a job well done. We wish to thank Peter FitzGerald Real Estate for bringing a favourable outcome on the sale of our property. Your willingness to consider our opinions and enter into discussion was much appreciated as was the fact that you worked persistently and kept in regular contact to provide updates. It has been a great pleasure working with you again. We have now used you twice and will certainly use you again. Thank you so much for your hard work, determination and dedication in successfully negotiating the sale of my property in Smith St, Wollongong. Your sound advice and professional attitude made, what was a traumatic experience for me, so much more bearable. In my opinion, you went above and beyond the 'norm' and I will always be grateful to you for your kindness and assistance. In the two years that we were looking to purchase a property, we met a lot of real estate agents in the course of viewing properties. Peter FitzGerald Real Estate's professional and sincere approach, made them stand out amongst many of their peers. When selling our property, potential buyers were shown through at our convenience and we never felt pressured. We would like to take this opportunity to thank the team at Peter FitzGerald for their wonderful service. Not only in dealing with our Wollongong rental, but in the eventual sale of our property. Their longevity and experience in the industry reflected in the care they took in dealing with out property. I could not have asked for a more professional, dedicated and courteous team to sell my property. You kept me informed and updated at all times regarding the progress of the sale. Your professional attitudes, service and advice was always there when I needed it. Just a few words to express to you our appreciation for your efforts in selling our property. It wasn't always easy, but you stuck with it and showed great integrity and dedication. You are a great agent, with outstanding standards and attention to detail. Your professional attitude, help, service and advice made our sales experience a positive one. Your hard work, dedication and commitment ensured us of the right buyer for our property. We thank your team and look forward to our new journey as 'Home Owners'. I would like to take this opportunity to thank you and acknowledge all staff who had a part to play in both leasing and selling my property in London Drive. I will strongly recommend your business to family and friends, making them aware that you stand on and practice morals and ethics in real estate. I look forward to a continued business relationship. Being interstate, the whole selling process seemed extremely daunting, but with your expertise it became effortless. We also appreciate your liaising with all other parties (ie. buyers, tenants, conveyancer etc) on our behalf. Having originally purchased my unit through Peter FitzGerald's almost 8 years ago, your company's 'Valued Customer' practices of waiving your commission on our sale, have placed you well ahead and beyond all your competitors. What I love about this agency is that they don't waste time, they only show interested parties through your property. And as a result you know that the people looking at your home are there for the sole reason to purchase it! No sticky beaks, no potential thieves eyeing off your personal belonging, just genuine people looking for their dream. I wish to convey to you and your very capable staff, my thanks and appreciation for their hard work and diligence, which resulted in a very satisfactory price being achieved for the sale. The staff were very professional in all aspects of the sale, I was continually kept advised of developments as the sale proceeded and I was treated with respect and courtesy when showing prospective buyers through the unit. Right from the start we knew that Peter FitzGerald was different to other Real Estate agents. Not only did they achieve above the price we required to sell, they also gave outstanding service, made you feel like you were the only customer they were dealing with, went the extra mile, was always contactable for any questions and even advice on purchasing a new home, and was extremely trustworthy and honest (which other real estate agents find terribly hard to do) Your professionalism and dedication enabled a quick sale. I was particularly pleased with the fact that you kept in touch and your support instilled confidence during the sale process. We found Peter FitzGerald Real Estate to be very straight, ethical and knowledgeable as well as the nicest and happiest agent we've met. Our townhouse was sold after having it on the market for only 3 weeks and got us the highest price (more than we thought). I have and will continue to advise anyone that we know of selling or buying to talk to them. |
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