Deciding whether to sell your home by auction or private sale? Here are a few pointers.
Whats the difference?
If you sell your home by auction, a date is set on which prospective buyers will gather to duel it out for your property. This might be in your backyard or at a neutral venue organised by your real estate agent. You set a reserve price, to ensure your property isn’t sold for a price that’s too low, by your reckoning. After bidding passes the reserve, the highest bidder wins, and the sale is binding - there’s no cooling-off period.
In a private sale (sometimes called a private treaty sale), rather than setting a date, you set a price. You then wait for a buyer to come along and make an offer you are willing to accept. Their offer might be subject to conditions, such as the buyer obtaining finance, and a cooling-off period of up to five business days may also apply, depending on your location.
- While it’s difficult to say whether an auction or private sale will fetch a higher price, the amount an auction will fetch is more open-ended, due to the fact that you don’t communicate a specific price prior to the auction. Contrast this to a private sale, in which you set a price and wait for someone to meet it (or for an offer you find acceptable).
- Having a fixed sale date can help with your planning. This can be useful if you’re selling one property while buying another and you’re juggling bridging finance.
- A deadline can focus the minds of buyers. Rather than procrastinate, they’ll be put on the spot.
- No cooling-off period means that after the contract’s been signed, it’s a done deal.
- You’ll have to pay auction fees, and auction advertising campaigns can be more expensive.
- Auctions can put some buyers off. Those who need to make an offer subject to finance won’t be able to because an auction bid is binding. Plus some people don’t like the pressure of auctions.
- Deadline pressure can affect sellers too. If the bidding doesn’t reach your reserve you may feel like you should accept the highest bid anyway. If your home is ‘passed in’ - i.e. the auction ends without it being sold - you will have to negotiate with potential buyers or put it back on the market.
Private sale pros
- You can consider offers carefully and wait for the right one to come along.
- A private sale might attract buyers who are uncomfortable with auctions.
- Unlike an auction, in which buyers can see who they are up against, in a private sale buyers make their offers ‘blind’, not knowing if they have any competition or what their rivals have offered. This might lead a buyer to inadvertently offer more than they might in a room full of bidders.
- There are no auction fees, and advertising fees can be lower.
Private sale cons
- If there’s a cooling-off period your buyer might pull out of the deal after signing the contract.
- No deadline means the sale could drag on.
Which method is right for me?
Several factors will affect your decision. These include:
- Where you live. Where auctions are popular, buyers are more likely to be comfortable with the format.
- The state of the market. Auctions can work best when there are lots of buyers competing for properties.
- What type of property you have. Some agents believe that with unusual properties it’s hard to determine an asking price, so they’re better sold at auction.
- Ask a few local agents for advice before making your decision.