It is true that the strategy you employ to sell your home, whether it be auction or private treaty can have a profound effect on your final sales result. Although both methods have their pros and cons, both are equally effective if employed in the right location, in the right market and at the right time. Sound like a minefield? Here we unpack the pros and cons of both selling methods:
Private treaty
Private treaty is the usual approach to selling property. When you sell your property by private treaty, you will set an asking price (estimated within 10%), and the property is listed for sale at that price. The property can also be listed as a price range or call for offers over a certain price (as disclosed in the agency agreement) or even an expression of interest without a requirement to disclose this price to potential buyers.
Pros
- You enjoy greater control over the sales process;
- You have time. You are able to consider all offers of potential purchasers and have the ability to extend the time for which your home is for sale if required;
- Many prospective purchasers are uncomfortable with the auction process and prefer not to buy under pressure. Private treaty allows potential purchasers to make private offers without knowing what other buyers think. It also gives you time to negotiate price and settlement conditions; and
- A less expensive marketing campaign, saving you money.
Cons
- Often private treaty sees properties sell underneath the asking price, but agents account for this and build in wiggle room to allow for negotiation. But this is not the greatest risk. Getting the listing price right from the outset is most important, as fluctuating prices can put potential buyers off. If the price is set too high, your property may not sell, an if it is set too low, you may miss out on maximising your profit;
- Sometimes properties can be on the market for a lengthy period of time and are at risk of looking stale to potential buyers. Unlike an auction there is no great urgency to act or a definitive campaign end date;
- The buyer has the option of a cooling-off period during which they can withdraw the offer; and
- A lengthy sales campaign can mean that you are more likely to be inconvenienced by opening your home regularly for inspection.
Auction
An auction is a gathering of potential buyers who publicly bid for a property. As the seller you and your agent set a reserve price. It is important that you are comfortable with this price as this is the lowest price you will accept for your property. Auction can be the right option when you are in need of a hasty sale – whether you need to sell your property by a certain date or have already purchased your next home. It can also be a good option if your property is unique and not easily valued, or if you are in a sought after location. Auctions are also beneficial in hot property markets where demand is strong.
Pros
- Strong competition can pit buyer against buyer, inducing a bidding war, resulting in a higher price paid for your property;
- Time-bound – an auction has a deadline and can create a sense of urgency amongst potential buyers;
- Your reserve price is protected giving you piece of mind;
- Opportunity to receive pre-auction offer/s;
- No cooling-off period; and
- Increased control over contract terms.
Cons
- Auctions generally cost the seller more than a private treaty sale;
- Advertising campaigns need to be extensive to deliver potential buyers on the day resulting in higher costs to the seller;
- Your property may fail to reach its reserve price and your property does not sell, leaving you out of pocket for these and any future marketing costs;
- If your property does not sell at auction and is then offered for sale by private treaty, the highest bid price may be used by potential purchasers to negotiate a lower purchase price; and
- The pressure of auctions can put off serious purchasers who prefer to transact under private treaty conditions.
For further information on what sales method is right for you and your property, and to learn more about the Urban Greenfield advantage contact the team at Urban Greenfield today.