Let’s have a look at what’s involved and the differences in each process to help you determine which may be the best for you.
What are your options?
An auction is usually a fast-paced and exciting way to sell your property. It’s a public sale which is conducted by an estate agent or outsourced auctioneer. On the day, potential buyers will meet at the property and place their bids.
It’s good to think of an auction as similar to a sporting event. Seems a bit strange, doesn’t it? But, there’s usually competitive spirit among the bidders and even a crowd of onlookers waiting to see who walks away the champion.
The property, if the seller decides to sell, then goes to the highest bidder (or winner if we’re still going with the sporting theme).
Selling privately means that your property is listed for sale and potential buyers can make offers in private (as the name suggests), without the stress or competition of other buyers. It’s important to note that in a private sale, the seller sets the sale price expectations.
Then the ball is back in the seller’s court who then decides whether to accept an offer or not. If an offer is accepted, both the buyer and seller goes into a negotiation process.
How to know which option is best?
In recent times, Australian auction clearance rates in most parts of the country have fallen and many sellers are leaning towards a private sale. Does this automatically mean you go straight for a private sale? Absolutely not! There are many factors you need to consider before you decide which route to go down.
To make it easier, let’s have a look at some pros and cons to shed light on your options.
- You’re protected by the reserve price. This means that if bidding doesn’t reach this agreed price, you do not need to settle for the offer.
- If your property has unique features, you may attract more buyers and raise the level of competition. As there’s no upper limit to the bidding, the competition could mean the winning bidder’s price well exceeds your expectations.
- Even if the property doesn’t sell, you still have the opportunity to contact with the most likely buyer.
- You set your own terms. This is especially useful if you want to set specific terms of sale.
- If bidding is slow, it can deter potential buyers as it could be seen that you’re expectations for the sale are too high and may reflect poorly on the true value of the property.
- The competitive nature of an auction could deter potential bidders.
- Marketing campaigns for an auction can be more expensive than a private sale and you are responsible to cover these costs no matter the outcome on the day.
- You have the option of setting a deadline to the sale, or keeping it open depending on how quickly you’d like to sell your property.
- This approach to selling can appeal to more potential buyers, with less public competition and being a more personal approach.
- You have the potential to sell faster as those who are interested can act once the property has been listed on the market.
- Those who express interest aren’t usually there to waste your time and are genuine buyers considering your property.
- If a deadline isn’t set, it could deter buyers or allow them time to look around and consider other options.
- Your contract needs to include a ‘cooling off’ period which gives the prospective buyer an option to change their mind.
- It’s common that potential buyers will try to negotiate for a price lower than asking.
As every property and selling situation is different, there are many factors that need to be taken into consideration when choosing how you want to sell your property.
If you’re planning to buy before you sell your property, have a chat to your local Mortgage Choice broker to ensure you have the set up in place.