Ep 4 – How to sell your property: Auction vs Private Treaty?
There are generally two ways that real estate can be bought and sold – by private sale or public auction. Understanding the difference between the two options and knowing the benefits and disadvantages between the two, can be helpful in deciding which method is better for you.
Private sale –
In a private sale, the property is advertised and offers are invited from prospective buyers. The sale is negotiated between the buyer and seller, usually with the help of an agent. The process involves viewings or open houses with potential buyers and does not usually have a set date by which the property will be sold.
Public auction –
An auction is a public sale, usually conducted by an agent acting as auctioneer. The auction is advertised as a specific place, time and date. Prospective buyers bid and, if the property is declared ‘on the market’, it is offered to the highest bidder, provided the bid matches or is higher than the reserve price set by the seller.
Which one of these approaches is best for you will depend on several factors including location, property type, your available time frame, nature of the market and your personal preference.
Benefits/Limitations of Private Sale –
Private sale is the most popular method of sale for property across Australia. There are various benefits involved with the private sale; it gives you greater flexibility for negotiating price and conditions without needing to spend money on an auction campaign. Selling via private sale can often prove to be less expensive as marketing campaigns for private sale properties are usually not as extensive. The private sale usually works well when selling the property isn’t a matter of urgency because the process allows for extended settlement periods and sale subject to finance, giving seller extra options when it comes to finding the ideal buyer. A private sale can be a slower process, however, this can make it easier for the seller to deal with the stress that can come with selling a property. This method of selling also offers great privacy, if that’s a concern for the seller.
A private sale does come with some disadvantages; firstly, the cooling off period, which gives the buyer time to change their mind after contracts have been signed. Selling via a private sale method often can take more time than an auction campaign. It can potentially result in a smaller price as opposed to an auction and sometimes you’ll have less power than you would in an auction situation.
Benefits/Limitations of Auctions –
Auctions are a popular method of sale and they have many benefits.
Auctions generate a sense of urgency and competition amongst buyers due to there being a set ‘end date’ for the sale of the property. This can get bidders really determined and fired up which can lead to the selling price exceeding the expected value of the property thereby maximising the sale price for the seller. An auction also provides sellers with protection in the form of a reserve price that is, the lowest figure you’d be willing to sell for. There’s also the possibility of selling for more than the reserve price so you have the opportunity to achieve a price well above your expectations especially if there is a competitive crowd.
However, there are a few limitations surrounding auctions as there are usually additional costs involved to sell a property via auction to cover the cost of hiring a specialist auctioneer. Keeping in mind that selling a property can be a stressful process, opting to sell via auction can put further strain on you and you may feel pressured to sell your property as quickly as possible.
The decision about which sale method is best for your property depends on the sort of property you own, the market you are selling in, your budget and how quickly you would like to sell your home. It is wise to ask your real estate agent about your selling choices to make sure you choose the most suitable option for you and your property Making the correct choice will make a world of difference to the final price that you can achieve for your home.
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