The two most common methods of selling property in Australia are auctions, and sale by private treaty, also called private sale. You should discuss with your real estate agent which method will work best for your particular situation. This will give you an opportunity to discuss not only the costs of each sale method (real estate agent costs), but also the likely effectiveness, given your particular market.
Auctions
At a property auction, individuals bid against each other, with the highest bidder winning the purchase of the property. Prior to auction, you and your real estate agent must come to an agreement on the reserve price for your property. The reserve is the lowest amount you are willing to accept.
Property auctions are very popular in urban areas where demand is high for particular properties, for example, inner city Sydney and Melbourne. The energy that an auction can generate can result in bidding wars. This assumes however, that you set a realistic reserve price.
Auctions are also set for a certain date and time. This means that for you as a seller, there is a defined period during which you will need to have your home open for inspection. This can be a relief for many sellers who find the task of juggling open houses with work and family, difficult to balance. With an auction, you will know how long you will need to show your home. In contrast, a sale by contract could take longer to generate.
There is no cooling off period after a winning bid at an auction and the buyer must pay a deposit, therefore, as a seller you know that the buyer is committed. Any questions or concerns, such as building inspections, need to be addressed by the buyer prior to the auction commencing.
One negative of a property auction is that when a reserve price is not met, the property is passed in. In many cases a sale can still be generated in the days following the auction, but potentially the money spent on advertising and hiring an auctioneer, may not result in a sale.
Private Treaty
Sale by private treaty involves setting a price for a property and waiting for a buyer to either make an offer, or agree to the asking price.
The cooling off period occurs after you and the buyer agree to price and requirements, and subsequently sign and exchange contracts. At this time the property is off the market and the buyer has the opportunity to conduct inspections; secure financing and obtain reports such as zoning plans and permits.
Just as the seller can make requirements such as the settlement term, a buyer can also make the sale contingent upon inspections, financing or even the sale of their current home. Remember, during the cooling off period, there is the risk that the sale could fall through.
Depending on market conditions, (how quickly will my property sell?) a sale by private treaty may take longer, and it may also involve some negotiation regarding terms and pricing. At the same time, the number of offers you receive and how quickly those offers come in, provides you and your agent with critical feedback on how well your property is priced. You do not have to wait for an auction result to make adjustments and therefore, you have more flexibility in your pricing.
Both property auctions and private treaty sales involve real estate agent fees, marketing and advertising costs, and therefore one method is not necessarily more expensive than the other. You should talk to your real estate agent about the costs involved, as well as the type of market you are in , before making any decisions.
Other article you may be interested in:
House selling tips
Real estate agent fees
Biggest mistakes property sellers make
