As a real estate agent, I am regularly asked buy sellers “should I auction, or should I just sell by private treaty or negotiation”. The answer to this question is not always straight forward and you need to consider all relevant factors.
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 sale is the way to go.
1) Fixed time frame; Because there is a date set for the auction there is a sense of finality. Buyers know when they must make up their mind. This is a great advantage if you are a seller with a set time frame such as moving to a new city to start a new job
2) Competition Amongst Buyers; At an auction, competitive bidding amongst potential buyers means that the selling price is often the maximum the current market will deliver. Any vendor should be happy, and any seller will know exactly the market conditions especially if there were multiple bidders.
3) Reserve Price Protection; 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 could achieve a price well above your expectations especially if there are multiple bidders.
4) Contract is unconditional; Auction sales are by law allowed to be unconditional with no cooling off period. Terms like deposit amount and settlement are decided before the marketing commences.
1) Cost; There may be additional costs involved to sell a property via auction to cover the cost of hiring an auctioneer. Not at First National Cairns Central, we have our own in-house auctioneer.
2) Sales Evidence; In Queensland we are not lawfully allow to give price guides to buyers, so it is imperative that the buyers do their own research.
3) Special Conditions of Sale; There are special conditions for an auction however they are prescribed and on display.
Tips for a successful auction
- Selecting an 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 the day. Make sure you have a skilful and experienced auctioneer.
- Its confidential; We all have friends and we like to share what we are doing but information about running an auction should be confidential between you and your agent only. Do not talk to friends about things like your expectations or reserve, you just do not know who they know and who they talk to.
- Setting a reserve price; Settle on a final reserve (i.e. the lowest price you are willing to accept) in the days leading up to the auction. Do this in consultation with your agent. You should take into consideration offers made prior and general interest and feedback from buyers. It is also important that you do not disclose or discuss your reserve price with anyone except your agent/auctioneer.
- Contracts: It is important to make sure you have the contract and supporting documentation such as disclosure statements available well before the auction date. This way you will have everything prepared in advance, and not have to stress over these details in the days leading up to the auction.
- 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.
- Appropriate Marketing and Advertising
It is the job of marketing to bring buyers to your property and in turn to the auction. Do not skimp on this investment. Good marketing today includes digital, social, and traditional. Staging a property should be considered and digital furniture in the photography is an option.
Private Sale / Treaty
1) 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 sales / treaties can be beneficial in that sellers have more time to consider offers made by potential buyers and vice versa. It sometimes suits first home buyers more as they have less experience in the system.
2) Possible flexibility; Private sales / treaties are 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.
3) Privacy; As a private sale / treaty occurs through a negotiation process, it provides greater privacy and enables you to keep the specific details of the sale out of the public eye until it become a public record.
1) Cooling off period; Private sales / treaties are usually subject to a cooling off period of 5 business days (QLD), as a result the buyer could change their mind after contracts have been signed.
2) Sale length; Selling via a private sale / treaty method often can take more time than an auction. 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.
3) Maximising the sales price; A key limitation of private sales / treaties 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.
Tips for a successful private sale / treaty
- Creating interest in the property; If timing of the sale is important to you, discuss your options with your agent you may also consider selling via “expression of interest”, which calls for offers by a specific date. Other options to increase interest in the sale 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 even staging or digital furniture in the photography.
- Pricing your property; As the price is often negotiated down in the private sale method, it is important that you price the property slightly above the price you would like to sell the property for. By doing so you will increase your chances of reaching your asking price after the negotiation process takes place. Setting the advertised price to high, will scare buyers away.
- Good advertising and marketing; All methods of sale require good marketing and advertising. This should encompass digital, social and traditional medium.