Selling by auction or private treaty is a highly debated topic in the real estate industry. Whilst many would argue that auctions are the best way to secure the highest sale price for your property given the competitive nature of buyers on the day, others believe private treaty is the way to go.
So which method of sale should you choose? To help make a more informed decision we have put together the following information to help you weigh it all up when selling your home.
Selling at Auction
Sense of Urgency
Auctions generate a sense of urgency amongst buyers. This sense of urgency is due to there being a set ‘end date’ for the sale of the property and this compels potential buyers to make a decision before or on the Auction day.
Competition Amongst Buyers
At an auction, competitive bidding amongst potential buyers means that the selling price often exceeds the expected value of the property, maximising the sale price for the seller.
Reserve Price
An auction provides sellers with protection in the form of a reserve price. This means that your property will not sell unless bidding reaches a pre-agreed level. Further, there is no ceiling price, so you have the opportunity to achieve a price well above your expectations especially if there is a competitive crowd.
Set Terms
Auctions are suited to situations where the owner wants an unconditional sale (no cooling off at auction) or wishes to set specific terms of sale, such as settlement terms to suit the vendor.
Tips for a successful auction
Your agent
The agent is the key ingredient to a successful campaign. Ensure you see several agents before deciding on whom to go with. Ask them about their agency’s strategies to maximise the best price for your property, and choose an agent with a proven track record in auctions. Ask them about their level of communication with you throughout the campaign and what are the key performance indicators to set your property up for a sale on or before auction day. It is also important that they demonstrate they are a trained negotiator and that you feel comfortable that you can talk to them about any concerns you may have.
Your auctioneer
The auctioneer will play a key role in the success of your sale, particularly in a scenario where only one or two bidders turn up on auction day.
Setting a reserve price
Settle on a final reserve (the lowest price you are willing to accept) in the days leading up to the auction. It is important that the reserve is well planned, so that you don’t end up negotiating this halfway through the auction when time, pressure and emotions are high. It is also important that you do not disclose or discuss your reserve price with anyone except your agent/auctioneer.
Accepting market value
Be prepared to accept the market value on auction day, provided there has been competitive bidding between multiple bidders. Sometimes auctions achieve results lower than your expectations as a result of market conditions, and this is why you need to properly plan your reserve price. Selecting a professional agent will ensure that you receive buyer feedback that in turn will provide you with important price feedback.
Private Sale/Treaty
Less intimidating for buyers
For many potential sellers and buyers, the thought of an auction can be quite overwhelming and intimidating. For this reason, private treaty can be beneficial in that sellers have more time to consider offers made by potential buyers and vice versa.
Urgency to sell
Private treaty is suited to sellers that do not have an urgency to sell, and where they may be open to accepting different sale terms, such as an extended settlement period, sale subject to finance or subject to the sale of the buyer’s home.
Cooling off period
Private Treaty is usually subject to a cooling off period and as a result the buyer could change their mind after contracts have been signed.
Sale length
Selling via a private treaty method often can take more time than an auction sale. This is because there is no specific end date to give prospective buyers a sense of urgency. No deadline may also mean that potential purchasers may not be motivated to act as quickly.
Maximising the sales price
A key limitation of private treaty is that the price is negotiated down compared with auctions where the bids increase. This means that the property is less likely to sell for more than the asking price.
Creating interest in the property
If timing of the sale is important to you, discuss your options with the agents you are considering engaging to sell your property. Some options to speed up the sale may include additional advertising, setting a lower asking price, being flexible about inspection times or making some quick cosmetic changes to the property.
If you would like more information about which is the best choice to sell your home let’s make a time to sit down to discuss further. Alternatively, with the changes in the market over the recent months you might be interested to know the new value of your home. I’m here to help.
Donna Spillane
Principal | Licensee
Belle Property Newcastle
02 4905 0110
0409 161 098
e: donna.spillane@belleproperty.com