When it comes to selling your home, the goal for most buyers is to achieve the best price in the shortest amount of time. But which selling method is more likely to see you achieve both these things – an auction or a private sale?
To understand which method will work best, you will need to understand the difference between the two and which one would suit you.
How does private sale differ from auctions?
The one clear difference between private sales and auctions involves the pricing of the property.
With a private sale, you set the price you wish to sell the property for, and use a real estate agent to sell your property on your behalf. The process involves viewings and open houses with potential buyers and does not usually have a set date by which the property will be sold.
On the other hand, an auction involves a campaign process that culminates in a bidding war on your property. You set your price and your settlement date, and then the property goes to the highest bidder at the auction, provided the bid matches or is higher than the reserve price set by the seller.
What are the pros and cons of private sale?
Here are some of the benefits of a private sale:
- You have the flexibility for negotiating the price and conditions
- You will not spend a lot on listings, as you would when campaigning for auctions.
- Private sales are generally less intimidating, as it is a slower process.
- Going through a private sale will give you more time to prepare for home inspections and viewings.
- A private treaty provides greater privacy and enables you to keep the specific details of the sale out of the public eye.
On the other hand, here are some of the disadvantages of a private sale:
- It is a slower process, and you might need to be patient waiting in timing the market.
- Buyers will often try to negotiate below your asking price, which can be frustrating when you need to secure your price to be able to buy another property.
- There is also the risk of setting the wrong price — you could misjudge the market and set the price too low, leaving you missing out on money.
- If you set the price too high, it will leave the property sitting on the market for a long period of time.
- Private sales are usually subject to a cooling-off period (this differs by state), and as a result, the buyer could change their mind even after contracts have been signed.
What are the benefits and disadvantages of auctions?
Selling by auction also has its fair share of advantages and disadvantages. Here are the pros of having your property go under the hammer:
Auctions hasten the selling process, as you set a date for the auction and the agent can sell the property before the auction, on the day, or directly after.
There is a sense of urgency on auction day, which can push the price up past your reserve price.
You can set specific terms for the sale when you put your property on auction.
However, there are also several catches when it comes to auctions:
- Your agent may pressure you to push down your reserve price to make the sale.
- There may also be costs associated with promoting and running an auction — anywhere between $5,000 and 10,000. This cost applies even if the property does not sell.
- You may feel pressured to sell your property as quickly as possible, lest you spend a great deal of money on the auction process.
Which one suits you the best — selling via auction or by private sale/treaty?
To determine which selling method is best for you, you will have to consider the type of property you own, the market you are selling in, what sort of budget you have, and how quickly you would like to sell your home.
There is not necessarily a “better” option for those who want to sell their homes — an auction and private sale have different processes, so there will be different ways for you to get prepared.
An auction is typically seen as the faster way to sell but may not be an option for those who cannot or will not spend the few thousand needed to run an auction campaign.
If you are not in a rush to sell your property, you should opt for a private treaty — it will give you ample time to study the market first and achieve the price you are aiming for.
Still, it is best to speak to your real estate agent about which selling method would suit you, your property and the current property market.
Also read: How to win in an auction