$1 Reserve risky but effective
An Auckland property auctioned with a $1 reserve last month attracted a lot of media attention, both before its sale and afterwards when the vendor disappeared on the buyer.
A $1 reserve means that house has to sell and cannot be passed in. The idea of the $1 reserve price is obviously to drum up a good crowd for the auction who want to see what happens. The last thing you want is for there to be one person at your auction. For internet trading veterans, the $1 reserve price is a popular marketing tool, but to put that on a property is a pretty risky venture, says Tim Carter, Barfoot & Thompson's auction manager.
"It is creating an urgency around it but I still think it is fraught with danger," says Carter. Unlike some other agencies, Barfoot does not allow vendors to bid on their property.
The vendor in Browns Bay saw his house go for a $300,000 discount but had a good crowd there of 100, 46 of them registered bidders. It definately brought in bidders who were attracted by the tiny reserve.
John Bolton, principal of Squirrel Financial Solutions, says for properties that have been on the market for a while, as this North Shore property was, there is an assumption that quite a few people have been through the house already. So they are not completely unprepared to buy if the bidding stays around their level. As one who attends quite a few auctions, Bolton can see why vendors are taking desperate measures in today's market. "Quite often the vendor price expectation is high. Buyers going along are not even getting to the reserve price." He has watched some properties attracting no bids and being passed in without a murmur.
As a result, potential buyers are starting to stay away from auctions and vendors are having to be more creative and find more innovative ways of attracting people to come along, says Bolton.
The mortgage adviser does not think that real estate agents are advising vendors to use the $1 reserve price tag. It is coming from the vendors, he says. The buyer of the $1 reserve North Shore house, Colin Boot, has now made contact with the vendor and says he's due to receive the keys to his new home on Monday.
By Gill South - Herald Homes
Posted: 17 Nov 2008
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