What Determine the Selling Price at Auction?

We all know the selling price at auctions is primarily determined by competitive bidding between potential buyers. The highest bid ultimately determines the final sale price, provided it meets or exceeds the seller's reserve price. But did you know there are many other factors influencing how much a buyer will pay for the property?

This is one of the most frequently asked question by our home and investment property buyers. While we love to be definitive with our answers, this is unfortunately a question where there is no straight forward answers. The selling price at auction depends on too many factors. From observations, a few key factors seems to be influence the direction of an auction results in Melbourne more than the other. One of these factors came as a surprise, and it seems to have the most significant negative effect on the auction price.

In this article, we will discuss our observations from our experience. We've been running our buyers advocacy business for 10 years, and from observation, we've identified some significant factors which determines the direction of the auction. For ease of reading, we'll split these factors in positive factors which can push the price upwards, and negative factors which drags the price down.

Of course, all of these factors should be considered in conjunction with understanding the value of the property, which is the price buyers will pay for the house.

What Determine The Selling Price at Auctions?

We started this interesting statistics collection exercise about 5 years ago, but due to the pandemic disruptions, we are unable to collect sufficient data. Post pandemic, we managed to start collecting meaningful statistics from 2023. Over the past 2 years, our buyers agents have attended close to 500 auctions throughout Melbourne, and have collectively noted and classified factors that seems to have an affect on auction prices.

How Were Our Studies Conducted?

To keep our findings both precise and unbiased, we began by establishing a realistic price appraisal for each property we are observing. This is the price which the properties will sell for, not what the sales agent wants to advertise at. From there, we logged every variable parameter of the sales campaign, open-for-inspection schedules and metadata, agent presentation and rapport, auctioneer performance, as well as auction metadata such as date, time, weather and location. Finally, we recorded whether the property sold at the auctions and if so, the price achieved at the auction. This rigorous dataset allowed us to isolate the impact of each factor on the eventual sale result.

One Common Sales Campaign Practice is Costing Sellers $100k

From our pool of data, we noted some interesting findings. While most findings are expected, one major factor surprised us. This is a man-made practice that is getting more common in Metropolitan Melbourne, especially in the eastern and south eastern Melbourne suburbs. And it is a practice that is made up by sales agents out of convenience, and this can cost the seller a hundred thousand in selling price. Yes, a big $100k drop in selling price.

Let's start dissecting our findings. While this study is based on Auction campaigns, many of these factors are applicable to other types of campaign, such as private sale, best and final offers (BAFO), expressions of interests, set date sale, etc, as well, as it affects the buyers interest and impression of the property.

Factors Which Can Positively Affect the Auction Price:

Let us start with some of factors which can positively influence the price, in no particular order:

1. Well Staged Home

Meticulously styled rooms help bidders visualise an aspirational lifestyle, turning a house into a “must-have” home rather than a negotiable asset. While it might cost between $3k to $30+k for a professional to stage the property, the fresh paint, curated furnishings, and strategic lighting, help the buyer visualise the house as a warm, welcoming home that they would want to live in. As experienced buyers advocates in Melbourne, we see staged properties in South-East Melbourne suburbs like Glen Waverley routinely fetch 5–10 percent above comparable, un-styled listings.

2. Well Run Auction Campaign

A well-run multi-channel marketing campaign—professional photography, social media reels, print ads, and targeted buyer databases—builds momentum long before auction day. High enquiry volumes and high traffic during inspections create social proof, signalling to onlookers that the property is hot and justifying more assertive bidding. In our study, our team assesses South-East Melbourne property campaigns, measure campaign reach as a lead indicator of how high the reserve is likely to be pushed.

3. Clear Articulation of Price Expectations

Transparent, honest and realistic pricing range and well-explained vendor instructions and reserves give buyers confidence that the agents are honest and not being sneaky. That valuable trust increases the active bidder pool, which statistically drives a stronger final price than a guarded, secret-reserve approach. Experienced buyers agents read these signals early, help you understand the real situation and help you determine a series of realistic auction prices, ensuring you enter the auction with confidence that you are not overpaying, rather than second-guessing the seller’s reserve and intent.

4. Weather

It does not matter how well a sales campaign has been run. The weather on the day of auction can play a significant role in determining the auction prices. Blue skies and mild temperatures encourage casual onlookers and neighbours to attend, swelling crowd size and lifting competitive tension. A warm (not hot), bright sunny day also help cast a good light on the property and help create that "FEEL" in buyers and bidders, usually resulting in better sales performance. Smart investors, or their buyers advocates Melbourne-wide, do adjust bidding tactics on the day in line with the forecast.

5. Day and time of the Auction

Saturday late-morning slots to early afternoon is the Goldilocks time for property auctions. This period tend to draw the largest audiences, as families finish sport commitments and start their property inspections. Weekday evening auctions can feel exclusive, but they also filter out casual bidders, and usually reduces the final auction price. Understanding these dynamics guides buyers agents and savvy buyers in selecting which auctions to prioritise and determine the auction bidding strategy.

6. Quality Auctioneer

The role of the auctioneer is more than the emcee of the auction event. An engaging auctioneer paces bids, creates a sense of urgency, controls the atmosphere, and leverages vendor bids to maintain urgency—often extracting tens of thousands more than a monotone caller could. Their charisma also keeps bidders emotionally invested long enough to stretch past pre-set "walk-away" prices. Something which DIY bidders always fall for and ended up overpaying. When our buyers agents prepare clients for auctions, we factor the auctioneer's reputation into our risk assessments before committing to our bidding strategy.

As a independent licenced buyers agents, we are not vested in the purchase, we are the neutral buyer advisor and gate keeper, we help pace the auctions to our buyers' benefit and provide our buyers with instantaneous advice on the spot, giving our buyers the confidence to stay on track, thus preventing over bidding and over paying for their properties.

7. Support from other Sales Agents

When multiple agents from the agency attend the auctions, they help encourage buyers and bidder bids, amplifying competition. As much as they try to deny, the role of these agents are not there to "help you bid". Their role is to encourage hesitant bidders to re-engage, impose more psychological pressure on the buyers to help they stretch their budget and offers. We understand their real intent and role during the auctions. These agents would usually politely stay away from our buyers at auctions as a matter of professional courtesy. For sticky agents, we have strategies to engage them as we see need. Recognising this orchestrated energy helps our buyers advocates decide on the appropriate bidding strategy DURING the auction. Yes, we do adapt and change our strategy depending on our observations throughout the auction.

Factors Which Can Negatively Affect the Auction Price:

What about factors which can negatively affect what buyers will bid at auctions?

1. Poorly Run Sales Campaign

While it might seem expensive to engage a professional real estate photographer (yes, not just any photographer), poor quality photos, rushed marketing, and unprofessional advertising, often results in poor buyer awareness, and the campaign never reaches critical mass. With low inspection numbers, the campaign loses momentum quickly and does not attract enough bidders to create a frenzy. Our buyers advocates rarely see such campaigns across South-East Melbourne property corridors. Most sellers understand the need for a proper professional campaign. A poorly run campaign will stick out like a sore thumb in this part of Melbourne.

2. Confusing Messaging from the other Sales Agents

While most sales agents in and around the eastern and south eastern suburbs of Melbourne believe a low advertised price range can attract more buyers, they often ended up attracting the wrong buyers with misguided expectations. They know the practice of underquoting is illegal in Victoria, and official narratives from the sales agents are always "the quoted price range is realistic, it is what the we believe in". So, while intentional underquoting is illegal, the sales agent can be legally "bad at appraising" the property. Underquoting and keeping the reserve price secretive, or multiple agents giving conflicting campaign strategies, confuse buyers and cause buyers to lose trust and retreat to the sidelines. That uncertainty thins out serious bidders, usually leaving only cautious token offers from buyers with the wrong budget expectations on auction day. Our experienced advocate independently appraises the property, and matched it with our buyers. We decipher mixed signals early, sets a disciplined ceiling price, and sets our strategy based on the confusing messaging.

3. Unfavourable Weather - gloomy, rainy, cold

If good weather can help achieve better auction prices, rain, wind, or extreme heat on the other hand, can literally dampen the auction turnout and the final auction price. Fewer bidders often equate to a softer results, and auctions being passed in, even if the reserve price is reasonable. Savvy buyers and investors, or their buyers advocates Melbourne-wide, adjust bidding tactics on the day in line with the forecast.

4. Location of the Auction

When the weather turns bad, auctions are usually moved indoors and held at the property's lounge / dining room. When this happens, the double whammy of bad weather, and enclosed space often results in lower auction prices.

5. "Shoes-Off" During Open for Inspections

Asking visitors to remove footwear can feel intrusive, extending wait times at the door and breaks the emotional connection to the home. Our buyers agents are at the forefront of receiving these unfiltered feedback.

The number of times our buyer clients complains or refuses to attend open for inspections if there is a "Shoes-off" policy tells us that this is really a crowd dampener. The crowded mess of shoes at open for inspections is hardly the way to greet visitors. The mess often cause confusion, frustration and anxiety right before the guest enters the property, killing any "love at first sight" vibes. Crowds that should be buzzing turn impatient, shortening tempers, inspection durations and lowering perceived value. Our buyers agents know a shoes-off rule often signals a poor auction and sales results and sees this as opportunities to pick up good deals for our clients.

6. Combination of all the Above Factors

If one of these factors is bad enough, what would a freak combination of many of these factors cause? At a recent auction for a $3million house in Balwyn North, a freak combination of Shoes-off, bad weather and indoor auction, costed the vendor some $700,000. That's right. The sales agent appraised the property at $3.5million, but the freak combination of negative factors meant the house was sold for $2.8million at the auction. Our real Appraisal puts the price at $3.2million - $3.3million. Even compared to our realistic appraisal value of $3.2million, it was some $400,000 short.

The Surprising Factor that Can Reduce a Property Price

The above study confirmed what many buyers advocates believed in. Location, day, time, weather, agent's presentation effort, etc, will all affect the outcome of the sales and auction campaign.

What surprised us, is the "SHOE" factor. Our hypothesis that a "shoes-off" campaign hurts prices, seems to be true! Open for inspections where the buyers need to remove their shoes often results in a lower selling price. To help us understand why, we did a follow up survey, asked a few agents to understand why is there a need to remove shoes and interviewed a few buyers on how they feel about removing their shoes. The results are not unexpected.

We discussed this "shoes-off" policy in our other article, where we try to understand the impact of "shoes-off" campaign and its effect on property prices. A few real estate agents were asked why they believe in the need for a "shoes-off" open for inspection campaign. We also interviewed some buyers, as well, on their thoughts of walking into a "shoes-off" inspection. The results are equally eye-opening. Read the article for more information.

Conclusion

So, now you know. On top of what other auction spruikers have taught you, these are the real factors affecting the auction prices. If you are attending an auction, get in touch to explore if our buyers advocates can help you understand the mechanics of an auction, and discuss the strategy we may adopt for the auction.