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04. How, When and Why to Auction in the Brisbane Property Market

June 20, 2018

In this episode, we are discussing how, when and why to auction in the Brisbane property market with Chief Auctioneer, Peter Burgin. After calling over 10,000 auctions, Peter comments on how auction can influence the sale of a property, and what makes the process unique in Brisbane City.

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In this episode we cover:

  • How auctioning in Brisbane has changed over the years;
  • What makes auctions unique in Brisbane compared to other cities and the rest of the world;
  • How auctions influence a properties time on market;
  • Why some owners have a reluctance to initially go to auction with the sale of their home;
  • The clearance rate at auctions in Brisbane compared to other cities;
  • How auctions can influence the sale price of your property;
  • The pros and cons of auction;
  • How auctions create more certainty and commitment around a sale;
  • What is the most important ingredient to an auction?;
  • After calling 10,000 auctions, what’s been Pete’s most memorable?

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Intro:

Welcome to the Brisbane Real Estate Podcast, where each week we'll be answering all of your questions relating to the local property market with CEO of Place Estate Agents, Damian Hackett. Be the first to get market insights, trends, and tips on everything you need to know when it comes to Brisbane real estate. To download a copy of our free Brisbane property report, head to eplace.com.au/podcast.

Damian Hackett:

Welcome to the Brisbane Real Estate Podcast. I'm sitting here today with Peter Burgin, who is the chief auctioneer here at Place Estate Agents. Welcome, Peter.

Peter Burgin:

Why Damian, thanks for having me here tonight.

Damian Hackett:

So Pete, you've now been our head auctioneer for 16 years, is that correct?

Peter Burgin:

16 Years, yeah, a long time. I've called just under 10 thousand auctions in that time.

Damian Hackett:

Wow! That's a lot.

Peter Burgin:

Been a great journey here.

Damian Hackett:

And before here you were ... Were you calling property auctions?

Peter Burgin:

Not property so much. Chattels auctions, so I was a Chattels auctioneer for about six years which was a really brilliant place to learn the craft of auctioneering, and we would do basically a 1 thousand lots a day, a hundred lots an hour, and stand there for, you know, like hour on hour, and it was a really great experience. We travelled all throughout Queensland, and it was terrific.

Damian Hackett:

You must have saw some pretty interesting things there.

Peter Burgin:

Very interesting things there, so from two dollars to two million, so ...

Damian Hackett:

I can imagine. So Peter, I mean being here for 16 years, have you seen, I guess much change in the Brisbane market with the way that auctions are conducted, or even people's acceptance of the auction prices?

Peter Burgin:

Yeah, significant change over the years. Like, I remember when I first started we, really, we would go to an auction, and it was quite frequent that we'd go to an auction and really it was an underwhelming experience. There was some good, general interest from the street, the neighbours, the general market, but the one thing that was really lacking was buyer acceptance in how plans [crosstalk 00:02:02]

Damian Hackett:

You say bidding? It's pretty important.

Peter Burgin:

Yeah, I didn't want to be that one, but yes, actually, that was an important thing, so obviously you need buyers to have a successful option, and the one thing that has changed significantly in the numbers support that is that we're now averaging four registered bidders per auction that we have. So there's a great acceptance from the buyer market out there and auctions are designed that they're very comfortable.

Damian Hackett:

Yeah sure? I mean, if you ... It's an interesting point because if you look at Australia, obviously Melbourne seems to be the auction capital of Australia, that's by far and away the most commonly used method. But Sydney's pretty close behind it. You know, Brisbane to a lesser extent over the years. We've kind of always trailed the market there, but as you said, over the last 16 years there's been a real push forward in that. And I'm aware, obviously, New Zealand does a lot of auctions, but apart from that, around the world, it's probably pretty unique, isn't it, as the primary way to sell real estate.

Peter Burgin:

Yeah, it's actually quite interesting because my understanding, in the UK is that you would not auction your property unless it was a distinct style, in some respect, or the residents had stepped in, and you know, it's just not the go-to method of sale. And likewise in America, where they have a different approach to or different attitude towards real estate in America or not but again I think the auction culture there is something that still very much in its infancy and it is very much a pretty driven market.

Damian Hackett:

I think from my experience in the states yeah they auction out work etc and find jury by auction but it's not a go to for property and I wonder if that's part of the reason why you see a lot of experiences the average time on market to sell a property in the UK and the USA is much longer than Australia and maybe auctions do a great job of bringing things to a head?

Peter Burgin:

Absolutely and I think time at market is the much critical thing. We've always believed the quicker we can sell your property the quicker we can get you on the market and get you off the market the better the result will be. I've always felt that if the longer you're on the market the negotiating power goes towards the buyers and we want to avoid that so the auction is a great progress you've process where you can engage market interest and accelerate that process for you.

Damian Hackett:

Yep, I mean one thing I've noticed over the years I've conducted or been involved in the price of many, many auctions and is in my experience if you're a seller and you want to really go to the market and get the highest price it's the best way to go but there is always seems to be I guess an initial reluctance, I've found, from owners straight up to auction a property. Why do you think that is or?

Peter Burgin:

I think auctions have a very public side to them and I think for most people that there's, no matter what they do in their life if there's anything that sort of exposes them to a broad range of people well then there's a little bit of nerve sanity that kicks in and it's like oh maybe it's better if I just go the quiet and easy way.

Damian Hackett:

Most interesting when you say some people do like exposing themselves to a broad range of people's through social media but I guess they get to edit the shot to know what the result is going to be before they post it? I guess maybe the uncertainty as to whether or not the property will sell on the day. Maybe that's the thing the people are maybe afraid of sometimes.

Peter Burgin:

There are no filters with auction. The only filter they've got is the agent so if you've got the right agent ...

Damian Hackett:

Yeah. That's interesting you look at one of the big things focus on at auctions is clearance rates and I know that in particularly in the southern states it seems to be that the clearance rate is higher, and it's 70 ... 80 percent, then the average clearance rate in Brisbane and Queensland. I guess two parts to that question, why do you think that is and your experience at Place is the clearance rate different to the Brisbane average?

Peter Burgin:

Yeah it's there's so many different ways of booking a clearance rate. It's always been something that's bugged me a little bit when I look at Sydney and Melbourne obviously they're much bigger capitals than what Brisbane is and they have a broader metropolitan area and therefore there's more competition even in the outer suburbs. If you look at Brisbane in the inner city or inner city fringe our auction clearance rates would be a lot higher and probably would parallel the Sydney and Melbourne markets or go closer to paralleling the Sydney and Melbourne markets than the fringe suburban markets so in Brisbane I've always felt like we've almost got two auction markets and therefore there should be two clearance rates that would measure that success but for us ... an auction day sale is only one part of the process. Yes that's the preferred outcome that is if you like the sexy side of real estate but we also recognize that in order to get you the best possible price sometimes we want to you use that auction day to try and set the sale up or start the conversation with buyers who weren't in the position to be there at auction and ultimately get you a better outcome.

Damian Hackett:

Yeah, I've always found myself that the point of running an auction campaign is to get the property sold for the best price you can in that market within a reasonable period of time. Now auction usually comes on day 28 where I would have thought that if you can get a property sold in that first 30 to 40 days, given there's enough demand out there, you're chances of getting a really strong price are good because as you said before it's fresh to the market, you're going to have competition, people are going to be excited about it and they won't want to miss out.

Peter Burgin:

Yeah absolutely and it's just really, really important, and I guess it goes back to that point before ... why do people what do people have some hesitation around auction, and if their clearance rates are hovering around that 50 percent well I can see where there might be some reluctance to think well if I have a true understanding than an auction may not be for me but I guess you and I both know that some of the best results we've got on properties have happened in that sort of week, 2 weeks, or even 3 weeks post auction.

Damian Hackett:

Yeah might be again part of that process and people don't want to go through that ... I guess the effort of having the open homes every week, tidying the house up, doing the inspections, having the auction on the day, getting the house ready, maybe that's people say hey listen can you just sell it? You know just get me so I don't have to go through all that rubbish and maybe that's part of it.

Peter Burgin:

Yeah absolutely I think we all like to take the easy way out and I guess there's been examples of where properties have sold off market or via private treaty and it's all seemed fairly seamless and easy but the question always remains if there was more competition would you have got more money and we always believe and I guess a place that we want to get as much as an atmosphere around your property as we possibly can. We want to have an highly intensive campaign and if we put a highly intensive campaign that generally translates to more competition and competition always translates to a bit more.

Damian Hackett:

Yeah, I guess one thing is you're saying if you get to the end of that campaign and you've run a strong marketing campaign out there whether that be in the paper or the internet, through a database, you've had a lot of people through, you've had four or five offers on the place, I guess you can be certain you won't be wondering a couple of months down the track did I get the best I possibly could out of it.

Peter Burgin:

I know. That's always the danger and I've always wondered why people are so quick to accept the first offer. It might feel like it's good and yes in some instances it may be but by surveying the rest of the market and potentially getting more competition, well what would that person pay if there was another buyer that was circling as well? You know if there were two other buyers they'd have to pay more.

Damian Hackett:

These people are naturally competitive aren't they. It's the way we were made up going back to the caveman days. We're all fighting for food and shelter.

Peter Burgin:

I guess by giving them that auction environment they're giving them an opportunity to compete and do what they want to do.

Damian Hackett:

Get that subconscious working. Fighting against each other. And that's something I've seen as well. That's I guess if you weigh out the pros and cons of auctions I guess the con side of an auction if you go through that four weeks of marketing and open houses and getting the house ready and opening your house up on auction day and you don't get the result that you want, it's a lot of effort isn't it?

Peter Burgin:

Yeah, it's a big undertaking and I guess the decision to sell is the decision to sell so unfortunately it really is best if you just keep your foot on the accelerator from day one until sale. What generally happens is the people run out of steam after four, five, or six weeks and then they start getting deflated, they start viewing their property differently and that's when they can actually end up making a silly decision and accepting either going back off the market and coming revisiting in 12 months time where they're going to have to do exactly the same thing again or accepting an offer which is substandard and with a bit more persistence they probably could have got a better outcome.

Damian Hackett:

I guess Pete, it's an old cliché again, it just depends on the market. Now I guess to have a good auction you've got to have something which is in demand that people want to buy and that your expectations of price are reasonable. Like you said hopefully if we can get more than one person that wants it and create that competition that people's human nature will make them pay maybe more than they wanted to and I think it's a great thing about an auction is once people make that decision it sells under the hammer or with the Queensland laws about the ... once you're registered that you're under auction conditions for the next 48 hours you know you've got a sale as an owner. It's not going to fall over on cooling off or building or pest or finance. It's not an option to purchase, you've got a sale.

Peter Burgin:

Yeah absolutely and there are so many external forces that can change a buyers mind whether it's something like seeing a building and pitch report which may not be a big issue but it just is magnified when they see it in writing. Something that their finance application doesn't go as smoothly as they want.

Damian Hackett:

So Pete in the success of an auction, what is that is the most important ingredient? Is it the market, is it the type of property that it is, what do you think is the number one thing?

Peter Burgin:

Yeah I guess essentially they're all important ingredients of the property itself will be a draw card but ultimately you still need the right personnel involved. You still need to have very experienced people that know exactly what they're doing throughout that campaign and you know and can trust that they're going to try and extract buyers out of the market who are thinking meaningfully around value of your property instead of just getting anyone who wants to have a crack.

Damian Hackett:

Yeah, and I guess it's an old saying it's no matter what your field of expertise is, it's someone who does it repeatedly and has had the experience, as I was saying, to be truly an expert at something you need 10 thousand hours of doing it so 10 thousand auctions so if it takes you an hour on every auction you might be an expert by now but that's it. If what you're saying there is if you're an owner that's considering an auction having people who auction all the time and that's their way of doing things have the expertise is incredibly important.

Peter Burgin:

You could auction the same property with three different agents and get three different outcomes.

Damian Hackett:

Yeah so Pete I mean, 10 thousand auctions ... is there one that stands out as probably your most exciting or interesting?

Peter Burgin:

Oh I think probably my favourite auction was actually a commercial auction. It was a service station just on the corner of Pacific Fair of the old coast and it actually sold for 3.6 million dollars above the reserve price.

Damian Hackett:

So what was the reserve?

Peter Burgin:

The reserve was 7.4 million.

Damian Hackett:

Wow!

Peter Burgin:

Yeah so it was just one of those auctions the property was in high demand. It was at the time we had Pacific Fair had just finished it's refurbishment. There was a lot of atmosphere around it. That was a great auction.

Damian Hackett:

Many bidders?

Peter Burgin:

We had about 8 registered bidders but auction morning it came down to about three that really controlled the auction from start to go.

Damian Hackett:

Sounds exciting.

Peter Burgin:

Yeah it was great.

Damian Hackett:

A lot of bids?

Peter Burgin:

A lot.

Damian Hackett:

Fantastic. Well Pete listen I really do appreciate you taking the time out to come and speak to us today and hopefully it's been an informative discussion about auctions for our listeners.

Peter Burgin:

Thanks for having me Damian.

Damian Hackett:

Cheers.

Speaker 1:

To download a copy of our free Brisbane property report head to eplace.com.au/podcast