Why Western Australia does not do auctions

Sellers who have moved here from the eastern states often ask why nobody in Perth seems to auction anything. Then an agent tells them auction is the way to get the best price, and they are left wondering which version is right.

REIWA publishes the number. “Auctions are less common in WA than other states with only around two per cent of properties sold under the hammer.” Nationally it is about one in five. Melbourne runs at around 30 per cent, Sydney around 23, Adelaide 27, Darwin 16, Brisbane 11 and Canberra 10.

That is not a quirk of local taste. REIWA gives the reason in one line: “The main reason behind WA’s lack of auction culture is the success of the REIWA Offer and Acceptance contract.”

What an auction is actually for

Strip away the theatre and an auction is a machine for producing certainty at a fixed moment. In most of the country a private treaty sale is not final when it is signed. The buyer has a statutory cooling off period and can withdraw, usually for a small percentage of the price. In New South Wales that is five business days at a cost of 0.25 per cent. So the seller signs, and then waits to find out whether they have sold.

Auction closes that gap. Sale at auction is generally exempt from the cooling off period, which is why the eastern states built a whole culture around it. The hammer falls, contracts are exchanged, and the deal is done that afternoon. The auction is buying the seller something the ordinary contract does not give them.

Western Australia already has that

Here, an offer becomes a binding contract the moment the seller signs it and that acceptance is communicated, which can be a phone call. There is no cooling off period at all. The buyer cannot walk away for a fee. We wrote about that in there is no cooling off period in Western Australia.

The second half is the paperwork. Every sale runs on the same Joint Form of General Conditions, adopted jointly by the Law Society of Western Australia and REIWA. Both settlement agents are reading the same twenty pages. There is no negotiation about what the contract means, because the contract is the same one they read last week and will read next week.

So the certainty an auction manufactures in Melbourne is already sitting in the standard contract in Perth. You do not need to build a four-week campaign and stand on the lawn to get it. That is the whole answer, and REIWA says it in plainer words than we would dare.

What an auction costs a seller here

An auction campaign is a marketing campaign with a deadline attached, and the marketing is where the money goes. Before you agree to one, there are four questions worth asking whoever is proposing it.

• Who pays for the advertising, and when? On most auction campaigns the seller pays upfront.
• What happens to that money if the property does not sell on the day? In almost every case it is spent either way.
• Whose brand appears on the advertising alongside the property, and how much of the spend is doing that work rather than reaching buyers?
• If it passes in, what does the listing look like the following week, with a public non-sale and the days on market still counting?

None of that makes auctions dishonest. It makes them a method with a cost structure the seller carries, and a seller is entitled to know exactly what they are buying before they hand over the money.

When an auction does make sense in WA

There are genuine cases. A property with no useful comparables, where nobody can price it with confidence, is a real candidate, and REIWA notes auctions came back into favour here during the 2005 to 2007 boom for exactly that reason, when prices were moving too fast to price against. A deceased estate or a mortgagee sale, where the executor or the lender needs a demonstrably transparent process, is another. So is a seller who wants an unconditional contract on a named day and is willing to pay for the campaign that produces one.

What those have in common is a pricing or process problem the market cannot solve on its own. For an ordinary apartment in Mount Lawley with eleven comparable sales in the same building, that problem does not exist.

What we do instead

Competition is the useful part of an auction, and you can have it without the campaign. We run our sales through Openn, where offers are ranked in the open and every buyer can see where they stand and improve their position. Buyers compete, the seller sees the field, and nobody stands on a lawn at 10am on a Saturday.

The marketing package is complimentary, worth over $3,000, and if the property does not sell there is no cost to the seller. That is the opposite arrangement to an auction campaign, and it is deliberate. If the campaign does not work, we would rather it cost us than cost you.

The short version

• Around 2 per cent of WA properties sell at auction, against roughly one in five nationally and about 30 per cent in Melbourne
• REIWA attributes that directly to the success of the Offer and Acceptance contract
• Auctions exist largely to escape cooling off periods and produce an unconditional contract on the day
• WA has no cooling off period, so every accepted offer is already unconditional in that sense
• The general conditions are a standard form, so both sides are reading the same document
• Auction campaigns are usually paid for upfront by the seller
• Auctions still suit unique property, deceased estates and mortgagee sales, where pricing or process is genuinely the problem

Thinking of selling and being told you should auction? Ask us for an appraisal and we will show you the comparable sales and what we would actually do, including what the campaign costs and who pays for it.

This article is general information about sale methods in Western Australia. It is not legal or financial advice. Auction and private treaty rules differ between states, and your settlement agent or lawyer can advise on your particular circumstances.

By James Yeoman, Director of KPR Perth Pty Ltd T/A Key Performance Real Estate