Australia and USA learning from each other with Auctions

May 12, 2020

Australia and USA, both learning from each other with Auctions.

Internationally, countries such as Australia, the United Kingdom, and Europe all use property auctions with a live auctioneer as the most common form of transacting real estate. For brokers, homeowners and buyers the process is described as the premium method, to achieve a maximum sale price while also being the most transparent way for a buyer to purchase real estate.

In 2019 James Pratt Auctions Group auctioned William Street, Double Bay for Sotheby’s International Realty. The reserve on the home was $6 million and on auction day it sold for $8 million, with 9 registered bidders competing for the house. The urgency and un-capped bidding allowed for a more robust result.

However, property auctions are not as popular in the United States, only a small percentage of the total real estate sales each year are sold by way of auction and the majority of these are done online. Another clear difference with a Real Estate auction in America over Australia is by default, the reputation. A real estate auction is often associated with a bank foreclosure or a distress sale and as a result vendors will shy away from this image especially in the luxury market or with a well-known personality as the vendor.

Beverly Hills agent, Bjorn Farrugia, from Hilton Hyland in Los Angeles agreed, “ In the past, auctions were usually related to bankruptcy and the recovery of properties, Often my clients like the idea of uncapped bidding at auction, but want to see more non distress sales before feeling comfortable to sell this way,

By contrast in Sydney, Australia, most weekends average around 800-900 Real Estate auctioneer auctions, so it’s easy to get comfortable with the process regardless if you are a buyer, seller or agent.

Why are auctions increasing in The USA?

Technology and social media is helping push auctions by allowing better education around the process and demonstrating why an auction is not always a distress sale. Many agents in the USA now have regular access to what top selling agents in other countries including Australia are doing to be so successful at selling, In many cases these top brokers have one simple difference, they sell consistently by auction as a part of their business model.

For example, agents see how Ken Jacobs head of Christies real estate in Australia sells a luxury home in Sydney for $20 million, they then can implement this into their own business.This adaptation by American brokers has seen an increase in luxury homes going to auction in the US with a live auctioneer conducting the auction.

Sotheby’s Beverly Hills broker Tanya Stawski commented, Our agent network within Sotheby’s now allows us to see what affiliate offices are doing overseas, it’s clearer than ever before onsite real estate auctions work in all conditions across the globe.The latest US auction statistics from James Pratt Auction Group showed American agents have increased real estate auctions by approx. 6% in California since January 2019. Australia ’s real estate auctions are mainly conducted onsite.

Why is Australia Increasing online Auctions?

Due to the coronavirus and the sudden temporary laws with social distancing and self isolation, real estate agents in Australia have had to temporary pivot from live auctioneer auctions – to a more US approach of online auction to keep selling. Instead of having a marketing period of 4 weeks, many Australian agents are now changing to the US method of 4-6 weeks before auction.

Another noticeable change to, an online auction is the greater emphasis on selling prior to auction day, this is done by showing the reserve price or buy it now button on the advertisement, where as in Australia an auction onsite would not disclose the reserve until post auction day The real estate market in the United States and Australia is very different, however one thing what they have in common is that regardless of an onsite or online auctions the auction process creates urgency, and allows the buyers more transparency.

 

James Pratt
CEO of James Pratt Auctions and the 2019 REB Australian Auctioneer of the Year
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