While there is a lot to do when it comes to organising your home for sale and preparing your home for viewing, some of the very first things you’ll be discussing when you are deciding on the real estate agent to represent you is the price bracket your house will fall into, and the best method for sale, is it by auction or private listing?
If you watch a lot of reality TV then you’ll be familiar with the competitiveness of auctions, however, by far the most popular method for selling homes is by private sale.
The biggest differences are that private sales are just that, private. A buyer does not know if there is any competition or what their rivals are offering, so they make their offers blind. Consequently, a buyer may inadvertently offer more than they would have otherwise to seal the deal.
Auctions on the other hand are public sales where buyers can see who they are up against and know exactly what the offers are. This can cause bidders to push their offers up in order to beat out the person standing next to them.
When it comes to weighing up which method to use there are a number of big factors to take into account as well as advantages and disadvantages of each sale method to consider.
Factors that can help determine if a private sale or auction is best for your property include:
The best person to take all these factors into account and help you decide what selling method is right for you is a qualified and experienced real estate agent. An agent will go over all the factors with you and explain their reasons and recommendations.
Private sales are typically best for properties in areas with less demand. In these cases comparable sales data will be relied on to set an accurate asking price.
Your agent will then handle all negotiations and offers from interested parties, going back and forth between them until the best deal is agreed on. Offers can be both informal and non-binding or in writing, which helps to get a gauge on how many serious buyers are in contention for your property and what the overall read is on the price.
Overall selling by private sale is far less stressful. You have the agent working on the side and filling you in on who is making offers for what and you can take your time deciding and responding. There is plenty of time to offer negotiations and look deeper into the terms of the contract.
As well as less stress, private sales tend to be a bit cheaper as you don’t have to cover the extra costs of hiring an auctioneer.
Don’t be fooled, competitive bidding between buyers can still happen with private sales, it’s a longer process that gives each party more time to think and evaluate where they stand, but it can be just as effective for driving up prices.
You also have more say in who buys the property if there is a high demand. At auction the highest bidder wins, it’s cut and dry, in a private sale, however, you get to look over applications and can have a say in who gets to move in, that means you can favour a family with kids over an investor, or vice versa if you want. You can also take advantage of any extras that might be offered to sweeten the deal, like cash payments over loans or getting the settlement period that really works for your moving plans.
The biggest drawback to private sales compared to auction is the cooling off period. While an auction is set in stone on auction day there is still a way to go after a sale is agreed on for private sales. In this time period a buyer may change their mind or have their request for a loan declined. Many private sales are shown as “under contract” in this limbo period which means the sale is going through, but hasn’t been completely confirmed.
Unlike a private sale, which takes place in whatever time frame suits the buyers and vendor, an auction is strictly limited to a certain date, time and location. Overall it’s more competitive and a highly emotional experience for buyers and sellers alike, however it’s a fast and transparent method for selling and buying property.
Auctions are especially well suited to homes that are particularly unique, causing a number of buyers to have a genuine fighting interest as there isn’t anything else quite like it, or where the real estate agent can identify a number of different buying groups that will be interested, for example, investors, upsizers and downsizers, which will put it in high demand.
There are strict rules that keep everything in line with regulations, however, what those rules are varies between the different states and territories. Typically the vendor will set the minimum price (reserve price) and bidding must be over this value to go ahead.
A professional and experienced auctioneer will ramp up the emotion on auction day by going at a rapid pace and creating a sense of urgency. Because the highest bidder is the only one in contention it also raises a sense of fear (especially fear of missing out) in the crowd, particularly if prospective buyers have missed out on winning at previous auctions they’ve attended.
Buyers must be fully committed to the purchase. There is no cooling off period, if you are the highest bidder you are committed to the purchase and must make your deposit for the property at the auction.
Yes. You can choose to go to auction unless sold prior. This enables you to designate an auction date but accept a quiet offer that’s attractive to you in the meantime. It encourages buyers to make a high offer early on to get the auction off the table.
The other way to go, if the thought of a public auction is a little unnerving, is to host a private auction where bidders can only attend by invitation.
When you take the time to hire the services of a real estate agent with experience and local knowledge, you can trust them when it comes to providing help with deciding your home sale method. They can steer you through to the end of the transaction and push for the best sale price possible, be it through private sale, or auction.
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