So your property passes in at auction. What comes next?

Many vendors see their property passing in at auction as a terrible result.

Some even view it as a public humiliation. But they shouldn’t. Sometimes even excellent properties don’t sell under the hammer. That’s especially true in markets such as the current one, where buyers are more circumspect and auction clearance rates are down.

Most properties will still sell, and often very quickly after the auction. For that reason, an unsuccessful auction shouldn’t be seen as the end of the road but simply as the first attempt in a planned sales campaign.

With that in mind, we look at what happens when a property doesn’t sell at auction.

Auctions in the Upper North Shore auction market

2021 was an outstanding real estate market on Sydney’s Upper North Shore. Prices rose more rapidly than at any time in the past 35 years and we had many weeks where the local auction clearance rate touched 100%. In other words, if you took your property to auction in Ku-ring-gai or Hornsby Shire, you were more or less guaranteed it would sell at auction.

2022 has been a different story. Not only has the citywide auction clearance rate fallen to around 50% (or even below it on some weekends), but prices have also started to recede, with CoreLogic recording a decline in Sydney’s median value for every one of the past five months.

The North Shore’s property market is faring better than many other parts of Sydney; however, CoreLogic reports that the local auction clearance rate is around 66.7%.

That means, if you go to auction, all things being equal you’ll have a 1/3 chance your property won’t sell under the hammer.

What happens immediately after the hammer falls?

Once the hammer has fallen, the highest bidder has the exclusive right to negotiate with the real estate agent to buy the property. If they can’t reach an agreement, then the agent can begin negotiating with other potential buyers.

If no one bids, or the property passes in on a vendor bid, the real estate agent can negotiate with anyone.

In our experience, around half of properties that pass in are sold immediately after auction through this negotiation process – or at least within the next few days – without any need to re advertise.

The next few weeks

If the property doesn’t sell during this period, your agent will often recommend relisting it for sale by private treaty. The agent will then try to bring out buyers who may not have seen your property during the auction campaign, or who weren’t yet in a position to buy (for instance, they may have needed to sell their own home, or get finance approved).

Often this period can be a time for both the vendor to recalibrate and work out what represents a realistic market value and what an acceptable offer might be. It also gives potential buyers the opportunity to take their time and negotiate a deal in a less emotionally charged setting.

Why do properties pass in at auction?

There are many reasons properties pass in at auction – most of which have little to do with the quality of the home.

In a slowing market such as the current one, buyers often become more circumspect. It’s only natural to worry that something may be worth less in a few months’ time. This feeling can be exacerbated when a would-be buyer sees no one else bidding.

Some buyers – and especially buyer’s agents – deliberately let a property pass in, especially if there aren’t many competitors for the property. Their rationale is that this should give them more room for negotiating.

Sometimes there are simply not enough buyers. For an auction to work, you need to have several interested parties but for a home to sell, you only need one buyer.

And of course, sometimes sellers can have an inflated view of their property’s value. If that happens, they may let a property pass in, even when a decent price has been offered.

Should you sell at auction in today’s market?

So long as you’re prepared to accept the reality of today’s market, an auction campaign can still be the most effective way to sell your home – especially if you’re prepared for what happens should the property pass in.

Your real estate agent should be experienced enough in all markets, to help you achieve the very best price in any conditions. They’ll advise you on whether or not an auction is right for you.

Want more?

If you’re interested in finding out more about the property market in Ku-ring-gai or Hornsby Shire,Get in touch.