Property auctions have long been an effective method for buying and selling property. Traditionally, setting a higher guide price in an auction was seen as a strategy to secure a substantial sale price. However, in recent times, a growing number of sellers and agents have discovered the advantages of setting a low guide price. Surprisingly, this counterintuitive approach can often lead to achieving significantly higher sale prices. In this article, we will delve into the reasons behind this phenomenon and explore the benefits of setting a low guide price in a property auction.
1. Attracting a Larger Pool of Potential Buyers
When a property is listed with a low guide price, it creates a sense of opportunity and competition among potential buyers. The lower price point appeals to a broader range of individuals, including those who may have previously considered the property beyond their budget. This increased interest translates into a larger pool of potential buyers, intensifying competition during the auction and potentially driving up the sale price.
2. Stimulating Competitive Bidding
A low guide price can spark a sense of urgency among bidders. Buyers recognise that the property is potentially undervalued and fear missing out on a rare opportunity. As a result, they may become more motivated to bid competitively, driving the bidding process to exceed the initial expectations. This dynamic can create a highly energetic auction atmosphere and significantly increase the final sale price.
3. Generating a Buzz and Heightened Publicity
A property listed with a low guide price generates excitement and buzz within the property market. The news of an undervalued property spreads rapidly among buyers, agents, and investors, leading to increased visibility and exposure. The prospect of a potentially lucrative investment attracts media attention and word-of-mouth promotion, resulting in heightened publicity. The increased exposure can generate a higher level of interest and subsequently boost the final sale price.
4. Creating Perception of Value
Setting a low guide price allows potential buyers to perceive the property as a valuable opportunity. It triggers the psychological principle of anchoring, where the initial low price becomes a reference point for determining value. When buyers perceive a property as undervalued, they are more likely to mentally adjust their price expectations upward, making them more willing to bid higher during the auction. The perception of value can be a powerful motivator in driving the final sale price well beyond the initial guide price.
5. Exploiting Competitive Nature of Buyers
Humans are naturally competitive creatures, especially when it comes to acquiring desirable assets. By setting a low guide price, sellers can tap into this competitive instinct, encouraging potential buyers to engage in bidding wars. The adrenaline rush associated with winning a fiercely contested auction can override rationality, leading bidders to surpass their initial budgetary limits. Consequently, the competition-driven nature of buyers can drive the sale price far beyond what might have been achieved with a higher guide price.
Conclusion
The traditional notion of setting a high guide price in property auctions to achieve a higher sale price is being challenged by the effectiveness of a low guide price strategy. By generating increased interest, stimulating competitive bidding, creating a sense of value, and leveraging the competitive nature of buyers, setting a low guide price can lead to substantially higher sale prices. However, it is essential to remember that the success of this approach depends on various factors, such as the uniqueness of the property, market conditions, and proper marketing strategies. Ultimately, auction sellers and agents should carefully assess each situation and consider the potential benefits of setting a low guide price to maximise the outcome of their property auctions. Connect UK Auctions have been using this tactic for many years and it has proven to be extremely successful. To provide an example of this selling technique in action, Connect UK Auctions sold this property, at auction. Please note the low guide reserve of £150,000 plus https://youtu.be/8GxXUp1wyMY – it finally sold at £279,000, with immediate exchange of contracts at auction.
If you have a property to sell and are considering the auction route, please do not hesitate to contact Connect UK Auctions for a free, no obligation auction valuation or please feel free to speak to us about your property by calling 0800 448 0100.
