A home owner unable to sell his house last year cooks up a plan to get a whole heap of attention with a $1 reserve price at a February auction.
The taxi driver company owner says he’s prepared to let the market decide it’s worth.
The fanfare in Blacktown on Valentine’s Day weekend certainly attracted a frenzy. More than 39 people registered to bid – most of them investors keen for a bargain.
However, while a real estate agent and a box of tricks may be able to drum up a bigger crowd, my bet is that it won’t make the crowd’s pockets any deeper. Do we really think that buyers these days, don’t do their research, and know how much they should pay?
It’s certainly not a desirable marketing strategy. Not one that should be encouraged.
With the low reserve price strategy largely said to be “high risk”, one question is left to be asked: Was it worth it?
Let’s take a look at the market.
Our $1 reserve property, 230 Blacktown Road, is a pretty standard four-bedroom, two-bathroom family home.
Recent sales in Blacktown this year include a three-bedroom, one-bathroom duplex for $510,000, a five-bedroom, two-bathroom house for $610,000, and a three-bedroom, one-bathroom house for $505,000.
In total, a total of 20 actual bids were made.
The result of the vendor’s nail biting? A $565,000 sale price.
It may have “smashed the reserve” as some reported, but was this a stellar or unusual result for the area? The median price and a number of local sources suggest not so.
Domain Group data puts the median house price in the area at $555,000 (12 months to December 2014). Clearly, a $565,000 result is far from remarkable.
In fact, it’s just $5000 more than the price on the home when it was listed for sale back in November 2014.
Of course, it did achieve the vendor a sale – a notable fact.
But whether the property would have achieved the same price if it was put to auction with a reserve price closer to the appraisal – and without using the $1 reserve tactic – is the question.
Listed as a private treaty offering in November, with homes averaging 43 days on market, it’s worth wondering whether an auction was just better strategy and that the new year a better time.
Auctioneer Damien Cooley is no stranger to auction gimmicks, having been signed up to auction Darren and Deanne’s The Block Triple Threat offering.
Mr Cooley said that setting the reserve at $1 services two functions – obtaining media attention that raises the profile of the property and the agent and, more importantly, feeding the sense of urgency with buyers that they can pick up a bargain.
In this case, the agent has done his job in bringing more buyers and registered bidders to the property, although Mr Cooley is not convinced that all of them would have been able to afford the value of the home.
“It’s probably lower risk in the current hot Sydney market compared to a quieter market.
“But I would never sell my home with a $1 reserve personally,” he said. Nor would he do it for every property.
The investor market in Sydney’s west is indeed strong. The investor-driven hunger for properties in the western suburbs is no secret.
In truth, this market is too hot and the buyers are too savvy for the home to have sold for anywhere close to $1.