What is a Silent Auction?
Simply put, Silent Auctions are where buyers place their best and highest offer on a property without publicly divulging that information or knowing what other buyers have offered. This method is proven to maintain the competitiveness of an auction while incorporating all the skill and negotiation of a private treaty. Buyers are encouraged to disclose their maximum offer therefore getting the seller the best price rather than the price slightly higher than the second highest bid.
Speaking on Sky News Real Estate, Mario Lattanzi, Principal of Clark Real Estate explained, “A Silent Auction is an auction bidding process whereby the negotiations are undertaken by the agent and the buyer without any disclosure of any competing offers to any other buyers that are bidding on the property.”
Positives
- No digital footprint if it fails
- Competitive not comparative
- One on one negotiations with buyers
- Defined date of sale
- Less transparent negotiation
- All Public Auction conditions are applicable to a Silent Auction
- Visible market feedback
- Manageable marketing campaign costs
- Structured selling process
- 3 step process: 1- Pre-auction 2- Auction 3- Private Treaty
Negatives
- Not a transparent process to buyers
- The lack of drama and theatre on the day
- Brisbane Auction clearance rates
- May repel some buyers who cannot buy under auction conditions
Why not just do a traditional auction?
Traditional auctions, as we alluded to earlier, are stressful and largely ineffective. In Brisbane, the auction clearance rate fluctuates around the 35% mark. As Mario Lattanzi told Sky News Real Estate, “that means that half of properties fail to sell on the day of auction”.
For an auction to be successful it requires two or more bidders on the day. The intent of the seller is that an auction will generate the competition between buyers and push the price up. This is true to a point. The transparency of the public auction process dictates that bidding will be comparative, that is, bidders will only bid one increment more than what they have to, to in order to secure the property. Therefore the property is not being sold to the highest price the buyer is willing to pay.
Positives
- Perceived competition
- Drama and theatre on the day
- Defined date for sale
- Unconditional contract
- Structured selling process
- Transparency-makes the invisible visible to seller
- Great for Agents profile
- 3 step process: 1- Pre-auction 2- Auction 3- Private Treaty
- Visual Market feedback (Public)
Negatives
- Comparative rather competitive
- Being reliant on the day, putting all your eggs in one basket
- Auction clearance rates can fluctuate
- Limited buyer pool
- Very stressful process
- The transparency in the process is great for buyers
- Cost
- The passed in price at auction is visible to all buyers, including vendor bids
- Pressure to lower reserve price pre auction and on the day.
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