EP. 1613 - AUCTION CLEARANCE FAKES �� – ARE THEY THE REAL GAUGE? OR JUST INFLATED NUMBERS?

Okay, good morning guys, auction clearance fakes.

For every Saturday night in Sydney, a single number drops the auction clearance rate and

suddenly the market is either on fire or it's falling apart.

But here's the question, who decided that that one percentage gets to control the entire

net narratives? Stay tuned guys, big topic.

Good morning.

Billy, Billy, Billy, Juggle, Juggle, Juggle this morning.

It's been busy.

Busy like a Saturday auction on the floor here there and everywhere behind the scenes.

It's gay.

Actually, it is gay.

It's like Juggle, Juggle, Juggle anyway.

It's all good.

I always say give a job to a busy person if you want to get it done.

Hey, Billy, auction clearance rates.

I've always wondered about this.

I've always touched my head.

This is one of those things that I looked at from the sidelines before I came into sales.

Hang on a sec.

How is it that this one figure determines what's going on with the market?

What about all the properties that haven't gone to auction?

Why is this determining whether the market, as I said, is either on fire or falling apart?

Let's talk about what an auction clearance rate is.

Yeah, it's a great controversial Tuesday topic.

Look, an auction clearance rate is a number that is reported in the marketplace.

Generally, after Saturday's close of business to give people an idea how many properties sold under the hammer.

Although it's got many flaws, it's been the number one real estate metric to gauge how the market's performing at any one time.

And for the longest time, it's been widely reported in the press.

You get it in the morning herald.

You get it in Domain real estate.com's main newsfeed.

To say the market's good, the market's bad, or the market's average.

It's the funniest thing.

It is.

So here is the definition.

It's sold properties divided by reported auctions, not scheduled auctions and not total campaigns, reported auctions.

So that word reported is doing a lot of heavy lifting.

The results are commonly published by organizations like CoreLogic, Domain, the REA group.

But here's the catch.

They rely on agents submitting results.

Let me say it again.

They rely on agents submitting results.

Now, how many times Billy have we gone on to Domain or real estate.com and gone?

I wonder how much that property sold for on a Saturday after we knew the auction was on.

And on Saturday had a client going to an auction and it wasn't even reported as sold.

So it's not an automatic system.

It's a voluntary reporting system.

So let me ask you this.

If an auction smashes the reserves with five bidders, fighting it out in the street.

Do you reckon that that result gets reported quickly?

So a roaring hot auction.

What do you reckon?

What do you reckon the odds are that that gets reported?

I know it's 100% on the Instagram first.

Then it's on the Facebook.

So that like agents are getting it straight out online, tooting their own horn, making a big deal that they've just broken a street record.

Everyone loves it.

Amen.

So if an auction passes in with crickets and awkward silence,

do you reckon that gets rushed through on a Saturday night to be reported?

I absolutely know it's the opposite.

But also we're busy negotiating something post auction.

We're not reporting.

We're not sold yet because we're busy.

And it's the same when selling.

So guys, I've got to tell you it's as you said, at least a voluntary reporting system.

If we don't report the auction result, we don't get a fine.

If we report the auction result, we don't get a thank you message either.

It's just a thumbs up.

Guys, the numbers are to butcher them really roughly 30% of property sell prior to auction.

30% sell on the day and 30% will sell post auction.

Like those are the rough numbers.

But on the auction day, people are so busy running around that even a good result might not get to real estate.com

because it's just come through as a text message or an email.

It's not there yet.

And same with the bad, you know, if it gets passed in.

And I have to say, like, you know, when we've got auction scheduled,

real estate.com and domain do a great job at handing the real estate agent.

You know, on a Saturday afternoon after your auction,

there's a million phone calls, automated phone calls.

There's a million text messages asking us, did it sell?

Was it withdrawn?

Did it sell prior?

Did it sell after?

Was it passed in?

You know, there's all this stuff.

Yeah.

But just imagine this, 1,000 auctions are scheduled across Sydney.

Only 700 results are reported by Saturday night.

And 500 of those are marked as sold.

The headline says 71% clearance rate.

Yeah.

Sound strong, doesn't it?

Yeah, absolutely.

But if you measure that against all 1,000 scheduled auctions,

you're actually looking at 50%.

So that's not a small difference.

That is a completely different market story.

And then you've got you withdrawals, properties that were quietly pulled.

You know, sometimes they appear re listed and sometimes they just disappear.

Yeah.

But when you shrink that denominator, the percentage magically improves.

It's funny how that works, isn't it?

Yeah, look, it's so true.

I guess there's different ways you can represent or show what the market's doing.

But auction clearance rates has always been one that keeps...

You know, the media keeps coming back to it as this metric to how the market's performing.

At least, Mark always says it's a...

You know, if you're a buyer and you're confused or you're a vendor or trying to read the play in the market,

like, what can you do?

Where do you go?

What is the best metric?

I'll say...

Go on, sorry.

No, no.

It's going to say...

Like, that's the truth, right?

Like, what else have people got to go by?

Like, what is the other metric?

And it always just like a standard me in this industry.

I'm like, but there's so many properties that sell via private treated.

There's so many properties that are selling prior or post auction.

So what is the metric?

I think there's a couple of things here.

First of all, you can be asking how many registered bidders were there

at the actual auctions?

I think that's a great metric, because if we're in a one-by-market,

which is kind of where we're sitting at the moment,

you know, are we in a roaring hot auction market?

Days on market, how long is it taking for properties to sell?

I think that's another great metric.

But I think all of these metrics all rolled into one billy.

Yeah, and stock levels would be my final one to add to that.

How many properties are on the market at any one time?

Because the fact is if you're selling an isolation,

it's always going to be stronger than selling in competition.

And lean on the experience of the auctioneer,

because your auctioneer has been pre-booked four weeks or five weeks in advance.

They're not just turning up on the last day and swinging the gavels.

So ask them how many bidders they're getting at their auctions.

And if there's a deal there to be done prior to auction,

sometimes that's the best strategy.

I agree.

You know, here's the part that really gets me though,

the preliminary numbers.

So the Saturday night clearance rate is often revised down midweek,

once more of those results roll in, right?

Because data is slow.

But by then, the headline has done its job

because the emotion is set out there with the people.

So the narrative actually is locked in.

No one's rushing to click on the clearance rate revised lower.

So let me ask you this.

You know, a clearance rate fake.

I think they can be misrepresented as an easier fact than say others,

such as what are the stock levels?

That's just the truth.

I don't think they're fake, but they have their sort of faults.

And it's relying on self-reporting system.

If you could have someone attend every auction,

I think it would be a different story.

That's a good job for you.

Sounds riveting.

Billy, Billy, about town.

Look, I think if you really want to understand what's happening,

look at volume.

As you said, Billy, I think that's a massive indicator I really do.

Look at how many auctions that actually being scheduled.

Look at the days on market, as we previously mentioned.

And look at how many properties are quietly being re-listed.

You know, because I think when you're making a million dollar decision

in Sydney or multi-million dollar decision in Sydney,

you actually deserve more than just that Saturday night percentage

design for a headline.

You know, that is actually the truth.

I think there's many factors there.

Look, I'm always on the phone talking to Vic Larusso.

Many of you guys will know Vic.

He's a celebrity auctioneer.

He's definitely one of the biggest auctioneers in the country.

He also does the traffic and weather.

If you're thinking, where do I know that name from?

Which is handy if you don't want it raining on your Saturday auction day.

That's true.

But I always call Vic and I'm like, what's happening?

How many bitters have you had at your auctions?

What's going on on the ground?

I think that insight from the auctioneer who's actually on the floor

performing the auctions is in your area as well.

It's very different to a headline statement for broader Sydney.

We do have a lot of micro markets in Sydney.

That's defined by a price or postcode.

And so you can't get too generalized.

There's a lot of strategy that goes into the auction.

It's a four-week build-up.

You know, to have it executed poorly will never do you a favour.

So there's a lot of strategy there.

There you go. There you go.

So in Sydney real estate, we are talking about Sydney real estate

for those of you guys that are tuning in as well.

Perception does move fast.

But reality always catches up.

So don't let a Saturday night percentage make that million dollar decision for you.

Make sure you are taking into account all the other factors that we are mentioning.

Do not take that Saturday night percentage as gospel.

There's actually a whole lot of other factors there that you should be looking at that we've mentioned here.

That's a big topic, Billy.

That's a really, really big topic that one.

I don't think we don't often hear people talking about it.

It's taboo in our industry.

Don't mess with the auction clearance rates.

But there you go. We've unpacked it.

We've unpacked it.

No, no, we're not scared.

And we love auction and we love private treaty.

We just love getting a good result.

But I think giving clients that truth and you know,

you can't find this stuff on a Google search.

Is it really important?

No, there you go.

I wonder what comes up when you put in auction clearance rates for Sydney this week.

We should have done that.

Yeah, you watch.

I reckon it will be sitting in the low 70%.

Yeah. And by the way,

anything above 70% is considered a really good auction market.

So, but just watch those numbers.

Make sure that you're actually getting the real information,

not the skewed results taken to account.

As we mentioned,

stock levels,

how many bidders are coming along to those options

and how long it's taking for properties to sell days on market.

I think all of those metrics together,

whack them into chat GPT and see what percentage it comes up with.

Thanks, ladies.

Have a really good day.

Have that felt.

See you guys.

Take care.

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