"Picking the right strategy to sell your home will make all the difference in the current property market."
It’s an uncertain time for both buyers and sellers. Clearance rates continue to fall, banks are tightening up on lending and more and more properties are being Passed-In every weekend.
With new properties coming online every week and less properties selling every weekend, the stock levels continue to rise. With such a dramatic shift in the property market, one of the most common questions we're asked by our clients, is whether it’s better to sell their property at Auction or via Private Sale.
Before answering the question, it’s important to understand the difference between these options and consider the advantages and disadvantages of both methods.
How does an Auction work?
Melbournian’s love selling their Real Estate at Auction.
An Auction campaign will usually involve you making the following decisions:
- Setting your Price - Based on your agents knowledge of the area, recent sales and knowing what other buyers in the area are looking for, you will be asked to set a ‘Reserve Price’ or your minimum selling price.
- Fixed Sale Date – An auction campaign will usually run for about 4 weeks, hopefully culminating in a Sale. It’s important to get your calendar out and work backwards when choosing your Auction date to ensure you’re avoiding any public holidays or dates that are going to stop interested buyers from attending open for inspections or the Auction itself.
- Buyers – Throughout your Auction campaign, your agent will meet lots of potential buyers getting an idea of their interest and budgets. Based on the feedback you receive from your agent, you should get a good understanding of how your property is priced and the chances of your property selling on Auction day.
- Auction Day – The auctioneer will call the auction, taking bids from interested parties. Buyers will then bid against each other in order to ‘win’ the auction by placing the highest bid. If the highest bid exceeds your reserve price, the property is then SOLD. If the bids don’t reach your reserve price, the agent will seek instructions from you and you might decide to lower your reserve price or to Pass-In the property and negotiate with the highest bidder behind closed doors.
What are the advantages of selling at Auction?
In a competitive Real Estate market, Auctions have proven to be a great way to achieve the highest price in relatively short time. With most campaigns running for 4 weeks and usually having a number of interested parties, the whole process comes down to which buyer wants it more. The excitement and emotion of an Auction has certainly made people increase their budgets to get that home they love.
What are the disadvantages of selling at Auction?
An auction will only be successful when there is a number of interested parties. When two or more people battle it out at an auction, then the price will usually exceed the reserve (if the property was priced reasonably). When the market is quiet or the supply of property increases, then an Auction may not be the best strategy. We’re seeing this now with more and more properties staying on the market for longer after being Passed In at Auction.
The main factors to consider when opting for an Auction campaign are:
- Market Conditions
- Demand for your property type
- Your reserve price
- Auction date
How does a Private Sale work?
Have you ever looked through Real Estate listings with Private Sale and a price listed next to it? Well that’s a private sale. The price is advertised and you can negotiate or buy the property based on the price set by the agent.
In a Private Sale, the property will usually be advertised for a set price. This is often the next step after a property fails to sell at auction. It’s also a good strategy for properties which may not do so well in an auction environment.
Once a buyer is found for the advertised price or a negotiated price, the paperwork is completed by both parties and the property is Sold.
The advantages of a Private Sale
A private Sale is a little less intense than an Auction campaign. The property is marketed similarly, the property is shown the same way by the agent and buyers are invited to make offers based on the price that has been set by the owner and agent.
Many buyers who may have had some bad experiences at auctions may prefer to purchase a home this way.
The disadvantages of Private Sales
Selling your home through a Private Sale does have some disadvantages which you should consider. The main factors being that you will usually have less competition and urgency to getting a high price for your property.
Without having a fixed auction date, selling this way could also take some time unless it’s priced correctly.
In Melbourne, most home owners (and agents) will lean towards taking the property to auction. Understanding the advantages and disadvantages to selling your home via Auction and Private Sale will allow you to make an informed decision. Keep in mind that in a competitive market, Auctions can help achieve a higher than expected result but when the market isn't as active, often the best prices are achieved privately.
When making the decision, make sure you consult a real estate agent and discuss both options and which will help you achieve the best possible price.