Auction v private sale: how to create a bidding war

Auction v private sale: how to create a bidding war

If you’re thinking of selling your home now may be the time to do it as buyers flood back into the market, according to experts.

“People are buying homes in steadily growing numbers,” said property expert Terry Ryder, founder of hotspotting.com.au. 

All indicators point to a healthy home buyer market: a strong economy, low interest rates, solid population growth, recovering property markets, a high level of government assistance for people building new homes.

But when it comes to maximising your sale price is it better to sell by auction or private treaty?

If you ask the experts some say the competitive atmosphere of an auction guarantees the best price. Others warn that auctions are fraught with danger and a private treaty sale is the most effective way to wring every last dollar out of a buyer.

Going once, twice…sold!

One good thing about auction is it entices buyers before a price is determined without putting people off with a set figure.

“Auction is ideal for homes where you consider there will be more than one interested buyer,” property expert John McGrath told Money magazine.

It can also suit properties which have unique selling points, like a great view, which can be hard to value so a healthy bidding war will often bring the highest price, he said.

The auctions market has continued to show signs of ongoing strength, with clearance rates – the percentage of homes that sell at auction – remaining above 60 percent in the major capital cities, according to RP Data’s October figures.

But selling at auction isn’t for every property, according to Andrew Winter, host of Foxtel’s Selling Houses Australia.

When private treaty sale is best

“If your property is stock standard, private treaty is often the best option. Buyers already know its value so you’re unlikely to get a higher price and it’s a lot less stress,” he said.

“Auctions can be expensive, but they don’t always cost more than private treaty. If a place has been on the market for many, many months the marketing bills can soon mount up.”

Selling by private treaty could cost around $180 a week in newspaper ads plus $350 for the for sale sign, according to Winter. By comparison, an auction will set you back around $6000 to $10,000, including a four-week marketing campaign.

Another difference between private treaty and auction is time.

“Even if a property is passed in, an auction is an easy way to identify serious buyers for further negotiations. But on the downside, if there are no bidders you’ve just wasted a big chunk of cash,” Winter said.

For some people, the stress of auction is too much to bear, according to McGrath.

“I’ve come across situations where the house was suited to auction but the vendor wasn’t. Some vendors are also uncomfortable with the public nature of auctions. They don’t want everyone knowing how much they received for their home,” he said.

In these cases, private treaty provides that discretion and allows you much more time to consider offers from potential buyers.

If in doubt, speak to your agent, says McGrath: “Ask them to explain why they’ve recommended a particular method of sale and be honest about your feelings. It’s part of an agent’s job to support you through the process so feel free to share your concerns.”

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