When is an auction not an auction?
The Real Estate Institute of NZ stated in their April property report press release that “Auctions are progressively becoming the favoured sales method in certain centres”. They went on to say that properties sold by auction represented just under 1 in 5 in April. In Auckland which they described as “dominating the auction market” 37% of all sales were by auction.
In Auckland their figures stated that 1,045 properties were sold by auction last month. As we all know Barfoot & Thompson is the largest real estate company in Auckland representing around 40% of the market. As their advertisement in a recent property magazine states they reported 593 successful auctions in April. That would mean that Barfoot & Thompson represented 56% of all Auckland auctions which clearly shows that this is without doubt their favored method of sale.
However if you read into the advert a little deeper, the headline figure seems to be somewhat misleading.
The facts state that only 410 properties sold under the hammer. To this final total of 593 “Successful Auctions” they have added 15 properties sold before the auction; 25 properties sold on the auction day (but not under the hammer) and a further 143 sold after the auction (and not on the day of the auction).
I was interested to see if I could find a definition as to what is an auction in the context of real estate sales. I chose to turn to the government body tasked with regulating and administering the industry – The Real Estate Agents Authority. In their auctions information sheet accessible as a download pdf document on their website they state:
My clear interpretation of this is that a property that is sold in a private agreement between a buyer and a seller after the “passing in” of a property at an auction is not an auction sale, despite the fact that the property was marketed as an auction. The same goes for properties sold before an auction. A successful auction is defined and assumed to be an unconditional sale on the fall of the hammer in an open process.
Therefore rather than the claimed 593 “Successful auctions" by Barfoot & Thompson in April, the reality was that just 410 successful auctions were achieved in the month. It further means that of the 707 completed sales which had been marketed as auctions in the month – 58% were sold successfully at the auction; whereas more than 4 in 10 of the properties marketed as auctions did not sell “under the hammer”.
The fact is that only Barfoot & Thompson publish this degree of insight into their auctions, I congratulate them for their openness. One only wonders as to the number of real estate companies who submitted statistics to the Real Estate Institute stating for auction sales in April making up the total of 1,045; as to how many actually sold under the hammer as a true auction. Maybe, just maybe, the statement made by REINZ should be restated as “Property marketed as auctions is becoming the favoured marketing strategy in certain centres”.