Statistics can and are used to trick people. Everyone knows the expression “Lies, Damn Lies and Statistics”. By choosing only convenient stats, almost any argument can be made to sound convincing. Take these two extracts from a recent Herald Sun article on how public auctions net better prices than private sales in Melbourne.
“Realestate.com.au data reveals houses sold by auction in Victoria’s capital this year have fetched $931,545 on average — $200,000 more than those snapped up privately.”
And also, “Auction was the best bet for unit sellers in Parkville, netting a median $805,000 sale price compared to $448,750 for private sale, a 79 per cent difference.”
So, you’d have to be stupid to not auction your property in Melbourne, right? Well, lets consider for a moment these two statements. Firstly, properties, on average, sell for $200,000 more. Remember, we aren’t talking about the same properties in the same area. Rather, the average value of all properties sold versus the three to four times as many that are sold privately. What suburbs are the most likely to be put to auction? Correct, the more expensive ones. So much for that compelling statistic.
Ah, but what about the comparison within the very same suburb? Yes, it is seriously being proposed that an auction might get a 79% greater value by taking it to public auction. After all, buyers don’t do their due diligence when buying and will pay more simply because it’s an auction. Oh PLEEEASE! The simple fact is these stats are selective and do not compare like with like. How silly do they really think we are?
Before swallowing this sort of nonsense, just ask the agent who is trying to use this evidence to convince you to take your property through a public auction campaign this question. If there are two buyers for my property left bidding at the end with budgets of $1,120,000 and $1,165,000 respectively, what would it sell for? If they struggle to answer, help them out. It will be one bid above the lower budget buyer, so $1,121,000. Possibly even $1,125,000 if the bids are still in larger increments. So, the good news is it will be sold in a strong competitive environment. The bad news? It would have been undersold by at least $40,000.
Fortunately, there is a means to ensure the highest price is paid by the buyer. It combines the best of the private sale and the public auction process and is called a private auction (think of it like a tender). How this works is for another day (or click the underlined link above for details).