Psychology

For those who do not reside in Queensland, or at least, in Brisbane, today is a public holiday.

And the reason for the holiday is as confusing as its name.  It’s “Show Day”, folks, and for the non-natives, that’s the Royal Queensland Show….but we never call it that; it used to be called the Brisbane Exhibition; but now it’s called The Ekka; and the holiday itself – that’s “People’s Day.” Still with me or zzzzzzzzzz?

The first ‘show’ was held in 1876 and the idea behind it was to show off the country to the city.  Nice idea back then, but now, we can kind of get there ourselves.  And a public holiday?  What a bloody joke.  I’m at work; what about you?

Anyway, the annual Ekka event means that Spring is just around the corner, and that, according to conventional wisdom, is the best time to sell a house.

Spring means good weather….more people venturing outdoors…. gardens looking great….plenty of leeway to coordinate a move that will minimise disruption to the school year and Christmas holidays etc.

And then there’s the nitty-gritty to be worked out when selling a property:  choice of agent, sales method, asking price, marketing budget, and, of course, timing.

If considering listing your house for sale by auction, a study by Brisbane-based JA group suggests that the weather can have a substantial influence over the outcome for auctions being held on-site.

JA did a sample across 364 auctions, cross referencing numbers attending with outcomes, clearance rates, and the type of weather.

The study found that as the weather deteriorated, not only did the numbers of attendees drop, as might be expected, but the auction clearance rates also fell.

An auction clearance rate is the most commonly cited benchmark for the relative heath of a residential property market.  The rate reflects the reported percentage of auctions that were successful.

On just over half of the occasions, when the weather was deemed to be “great”, an average of 31 people were recorded at each of the auctions; leading to an average of 1.64 bidder registrations and a property clearance rate of 48%.

On 27% of the occasions with “good” weather, attendees dropped to an average of 22, with bidder registrations at 1.2.  The auction clearance rate also dropped to 36%.

A further 11% of auctions occurred in weather that was deemed to be “ordinary” and saw attendees dwindle to 16 with bidder registrations averaging 1.5.  The clearance rate hovered at 38%.

“Very ordinary” weather occurred for the remaining auction sample.  And here, I do have to interject that in spite of our recent rains, “very ordinary” might well mean “spectacular” to those folks in the southern parts of the land, and yes, we are spoiled up here in the Sunshine State.

The average crowd size and bidder registrations remained about the same, but the gloomy weather saw the clearance rate plummet to 18% – a full 30% drop from the auction results recorded on great weather days.

So, there’s no solid scientific data to back up any conclusions here, but hey, I’ve seen heavier bets placed on far less credible data.  And I must admit it makes sense. One thing agents do agree on is that optimal weather conditions are conducive to optimal sales results, though this doesn’t mean that a good sales result is doomed due to overcast weather conditions.

This study suggests that for auctions, agents may want to consider creative ways to ensure healthy attendance numbers and buyer activity; and sellers may wish to re-evaluate the time of year to sell, and whether to consider an in-room rather than on-site auction.

Parts of this Missive first appeared in “INSIDER”, Courier Mail Property Section, 28 July 2012

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9 thoughts on “Psychology

  1. F.Sweeney says:

    Michael,
    Your historical estimate of Agricultural Shows, e.g. the Ekka, smells of USA Marketing crap and puts Shows down. It can be useful for children to learn that milk comes from cows, goats etc, and not Coca Cola machines. Yes Shows (& Race Meetings) were designed in the horse & sulky days to show the best produce & animals – horses to pigs – to breed from and to sell, there. They still do except the bulls and rams are now so fat & overfed with dubious substances to be sterile and need many months of let-down (partial starvation) to use. It was, and still is, a useful Agricultural Extension (=teaching) exercise and it works. 25 years ago I introduced an ‘Ag. Show’ in Mindanao, Philippines, even including their local culture of fighting stallions and a horse race with Engineers from Snowy Mountains Corp as stewards. That proved highly successful. The merchandising ‘Show’ still works but the fighting stallions & horse race have been censored.

  2. thanks – but a public holiday – where most stay at home and have a BBQ – give me a f8cking break mate

  3. Stevie J says:

    Auctions Auctions Auctions…..This comment is mostly unrelated to the above but it’s good to get good information into other readers hands. I’m not saying that you’re in favour of auctions and they do provide good historic data but they are the worst way to sell property. If you have the second highest bidder at 500k and the winner at 501k, but would have paid 530k the vendor loses 29k. Check out Neil Jenman’s books and website to get in insight into his thoughts and system. You may be familiar with his work? I’ll be selling my house soon through a Jenman Approved agent, who focuses on getting the ‘buyers highest price’. Just a plug for anyone looking to sell soon, brilliant system. Sure, auctions can work sometimes, but getting the buyers highest price is of most importance and not putting on a show. Their system through realestatemonitors is available all over Australia. Happy selling people……

    • Mark McGill says:

      I wouldnt say that auctions are the “worst” way to sell, they have their place. Say that to a seller of mine who had never auctioned before, we had 7 bidders and he got $50k above his reserve and $25k above my initial appraisal price. Its not the method that works or fails, its the agent who is driving it. There are plenty of agents who dont do auction who get great results, and plenty who do and also get exceptional results. I have seen plenty of jenman agencies not work, or interestingly, many of them are also adopting an advertising strategy as well. Keep an open mind on method.
      check out this link http://salesarchitect.com.au/index.php?option=com_content&view=article&id=83:successful-auction-with-multiple-bidding&catid=35:youtube-media&Itemid=56

    • Stevie J,

      I would like you to have a look at a recent sale that Michael Matusik recently attended at 16 Boomerang Rd, St Lucia. Two sales in the same street, on the same block size in very similar condition sold only a few months earlier for $630,000 and $650,000. The same Jenman agents priced the property at $640,000. The sellers chose to go ahead with us and auction the property, with a reserve set at $665,000. It sold under the hammer for $775,000.
      Did we undersell the property or get the second best result?
      Now Stevie, had the seller listened to the Jenman agent, the property would have gone on the market at $679,000, maybe selling for the asking price. But they would have undersold the property by nearly $100,000.

      And you wouldn’t call it a rising market at the moment either would you?
      Michael may have some thoughts on the auction also.

      • Stevie J says:

        Guys, first of all thanks for your comments on this. Always good to have an open discussion. I guess my first comment would be that yes, in a strong and rising market an auction could get better results if the buyers gets caught up in the thrill of winning the property and pay above their highest price. That certainly hasn’t been happening down here in Melbourne much lately. However, the key is to obtain the buyer’s absolute highest price. So, in the example of the property that sold at auction for 775k it may have sold for even more if their highest price was known. i.e. The buyers may have been willing to pay 800k for the property and were wrapped to save 25k. Did you ask what the maximum was that they would have paid for it? I certainly know many people who bought at auction and would happily have paid more than what the property sold for, but at auction you don’t have to go much more above the second highest bidder. Or, they may have had a highest price of 750k and in the emotion of it all paid 25k over their limit. That is always a chance, but we won’t know unless the buyers absolute highest price is known.

      • Mark McGill says:

        Stevie J – you are always bidding against the seller :) No matter what the price or method! If you are $1 above the other buyer that is all well and good, but both buyers still need to be at a level where the seller will consider a sale. Fortunately in both these cases, it was $50k and $100k earlier :)

  4. take a breather – not advocating auctions – however auctions work if you are selling the appropriate property, are selling in a rising market and/or need to get a result in a tight time frame – as for Jenman – hmmmm, he is just one opinion – it ain’t gospel

  5. I’m not a big fan of auctions and my experience has shown that sales by private treaty work best if you want the highest price. Back in late 2003 when I bought a property at Paddington I had bank approval for $400,000 and was willing to pay exactly that for the property. I opened private negotiations with a contract offer of $350,000. The vendor didn’t bother with a counter offer. The agent said they would commit to taking the property to auction. On auction day there was a crowd of about 30 people. The agent had to ask me whether the property had a safety switch – because I had done all the necessary inspections beforehand. The auction started and…nothing. No bids. The auctioneer eventually had to do a vendor bid at $380,000 to start things off. After 3 bids we got to $385,000. One of those bids was a dummy bid from the back because that person disappeared shortly after. The auction stalled at $385,000 and the auctioneer went in to seek vendor instructions. Upon return the property was “on the market.” There was a bid for $386,000. I now decided to bid – $386,500. The auctioneer looked relieved. Then…..no more bids. The auctioneer summed it up nicely. “Don’t let him take it with just one bid!” After a time there was a bid for $387,000. I countered with $387,500. A short time and – sold – to me! All I can say is that this vendor lost in the auction process because I would have paid $400,000. I will also say, there is something very powerful about bidding at a stalled auction where bids are in $500 lots and having 26 bids left.

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