07.27.2022 Selling Advice

What Happens When A Property Doesn’t Sell At Auction?

What Happens When A Property Doesn’t Sell At Auction?

With auction rates clearance now around 50% in Sydney, we look at what happens when a property doesn’t sell.

In mid-2021, Sydney’s auction clearance rate was riding high at almost 90%. Now, it’s hovering around 50%, according to the latest data from Domain. That means half of Sydney properties that go to auction no longer sell under the hammer and are instead ‘passed in’.

But that doesn’t mean they don’t sell at all. Most properties that get passed in still get sold – and often that happens very soon after the auction itself.

With that in mind, we take a look at what happens to a home when it passes in at auction.

Why are auctions so popular in Sydney?

Auctions are easily the most popular way to sell real estate in Sydney’s eastern suburbs and for good reason.

Sellers often like them because they usually come with a short, sharp campaign. They also create a competitive environment, in which buyers see the competition and feel the emotion of potentially losing a property they had their hearts set on. This encourages them to offer their best price.

But it’s not all one-way traffic. Many buyers like auctions too because the auction process is actually quite open and transparent. People know what others are willing to pay and a buyer simply has to be prepared to offer more (and meet the vendor’s reserve). This means they often feel there’s less risk of overpaying themselves.

To work properly, however, an auction needs competitive tension. That means having more than one actively interested party. Otherwise, there’s no competition to drive the auction forward.

Buyers also need to have the confidence to put their best foot forward in a public environment. That’s not always the easiest thing for many to do, which is why it’s often so hard to get that first auction bid – after which the bids often flow more freely.

Why don’t properties sell at auction?

There are many reasons properties don’t sell at auction and many have nothing to do with the quality of the property itself. We’ve set out some of the more common ones below.

Weekly Market Insight
Receive Ben Collier's Weekly Market Insight directly to your inbox.
Sign Up
  • Enter your details to receive the report
  • Enter your details to receive the report
  • Enter your details to receive the report
  • This field is for validation purposes and should be left unchanged.

  • A limited buyer pool. It only takes one serious buyer for a home to sell but, for an auction to work, several potential buyers are needed. Some properties – especially high-end or unusual ones – simply won’t usually have as great a pool of buyers. These properties are often better listed off the market or for sale via private treaty.
  • Market recalibration. Right now, we’re seeing a recalibration in the Sydney property market. Prices were rising in 2021, and people were confident that, if they overpaid slightly, they would eventually recoup that money. At the moment, prices are stabilising, so buyers are more wary of overpaying.
  • Lack of confidence. A lot of people don’t like bidding in public. With the market slowing – and auctions slowing too – the social cues that are present in a successful auction, such as rapid bids and multiple registered bidders, aren’t always there now. This can make people reluctant to make an offer publicly.
  • Strategic reasons. Some buyers deliberately don’t put in an offer at auction, reasoning that they’ll get more room for price negotiation after the hammer falls. That’s not necessarily the case.
  • Unrealistic expectations. The vendor sets a reserve prior to the auction and, if it’s not reached, the property doesn’t sell. In a rising market, vendors can sometimes get away with having inflated views of their property’s value. In a falling or sluggish market, they usually can’t.

What happens after the auction ends and the property hasn’t been sold?

The next steps depend on whether or not anyone has bid on the property at auction. Generally, the real estate agent must negotiate with the highest bidder before they’re allowed to take it to other parties. Where there has been no bid – or only a vendor bid – the real estate agent can negotiate with anyone they like.

So, if you’re interested in a property, it often pays to make an offer at auction, even if you don’t think you’ll end up buying it under the hammer.

Good real estate agents will work hard to continue to negotiate during this period to help their clients achieve a good price and we find many of our properties sell straight after the auction, or at least within the next few days.

The longer term…

Sometimes, however, property won’t sell. But that’s definitely not the end of the road. The next step is that we may advise our clients to re-list the property for sale by private treaty.

We’ll then re-market the property to our database of buyers, as well as to the general public. After all, the briefness of a standard auction campaign means it won’t necessarily bring out all buyers. Very often there will be some people who weren’t ready to bid at the auction but who may now be in a position to buy.

In short…

An auction campaign can still be an effective way to get a good price for a home, even if it doesn’t actually sell under the hammer. That’s especially true in a market such as this one, where buyers are more wary about bidding in a public setting.

Want more?

If you’d like to find out more about auctioning your property in Sydney’s Eastern suburbs, get in touch with our team today.