SBA stands for Sales by Auction. The SBA% is the number of properties
listed for sale by auction as opposed to other sale methods, calculated as a percentage.
So if there were 10 properties
listed for sale and 3 are to be sold via auction, then the SBA% would be 30%.
Imagine you're a real estate agent trying to sell a property for your client.
You get an offer from a buyer and pass this on to the owner. The owner comes back with a
counter-offer and you pass this on to the buyer.
This "back and forth" goes on for a bit when you receive another offer from a different buyer. This is higher than the last offer made by the prior buyer. You pass it on to the owner and the owner makes a counter-offer. You pass that counter offer on to the buyer and also let the other buyer know there is another bidder and they have offered higher.
Things get really messy when a third buyer enters the ring and starts making offers! You now have to inform the owner and 3 buyers. You're going back and forth like a piston in a rev-head's hot rod.
What's a real estate agent to do? How about an auction?
Real estate agents encourage their clients to sell via auction in markets where demand exceeds supply.
That makes perfect sense in a market where demand exceeds supply. But what if supply exceeds demand?
As the agent you would spend a lot of time and money advertising the property to ensure as many potential buyers know about the auction. But if supply exceeds demand, it's possible nobody will turn up.
So the strategy that works well in a market where demand exceeds supply fails miserably in a market where supply exceeds demand.
As investors you want to buy in markets where demand exceeds supply since it is the only way in which prices rise. One way to gauge if demand is exceeding supply is to calculate the percentage of properties being listed for sale by auction as opposed to those listed "by private treaty"
The SBA% is another stat investors can use to understand the nature of supply and demand in a property market. When hundreds of thousands of dollars are at risk, can you really afford to ignore this indicator?
The SBA% is one of the statistics incorporated into the DSR+.
Some alternative sources for this kind of data include: