Selecting the most suitable method of sale for your property
One of the first decisions you will be required to make when selling your home is the process in which it will be sold. Generally, your real estate agent will talk you through the processes and recommend the most suitable method for your specific property type and location, however it is important that you have your own understanding of the different techniques so that you can make an informed decision. With many misconceptions around method of sale in the property industry, we have compiled a no-nonsense guide to help you separate fact from fiction and truth from tale!
Arguably the most controversial of the methods of sale, you will find that most homeowners have an opinion on auctions, and it is rarely ‘on the fence’! An auction is held at a specific place, time and date after a marketing campaign that runs for approximately four weeks. The property is marketed without a price and shown through private inspections and open homes in the lead up to the auction. Interested buyers must register before auction day where an auctioneer will take bids on the property and sell it to the highest buyer.
A ‘reserve price’ is set prior to auction day, this is the lowest amount that the sellers will accept for the property. If this figure is not achieved, the auctioneer will pass the property in, and the agent/vendor will commence negotiations with the highest bidder/s. Auction rules and regulations vary from State to State, and in Queensland it is illegal for an agent or seller to discuss a price range with potential buyers. Auctions can be private or public, either conducted on the site or at a pre-determined location and offers cannot not be subject to conditions such as finance or sale of another property.
- Auctions create a sense of urgency amongst buyers that encourages competition
- You don’t run the risk of overpricing or under-pricing your property
- An unconditional contract means a smoother & generally quicker settlement
- Some buyers become frustrated when there is no price indication available
- Public auctions can be off-putting to potential buyers
- If the property does not sell at auction, you may be required to re-market at an additional cost
Private treaty is a flexible method of sale that involves listing and advertising a property at a certain price or price range. The price is set by the seller based on the agent’s advice, considering recent, comparable sales in your area and the current condition of the market. There is no set rule as to the length of a private treaty campaign, however they generally last on average 4 weeks, during which the property is shown through private inspections and open homes. Prospective buyers can put in offers at any point during the campaign, which the agent then communicates to the seller until a deal is negotiated. The agent will often use a multiple offer situation to leverage a better price and conditions between buyers. There are several different ways that a private treaty sale can be advertised…
For Sale – The property is advertised without a price and allows prospective buyers to make offers where they see value. With the seller’s permission, the agent can provide a comparative market analysis that will give buyers an idea of the price range.
Offers Over – An ‘offers over’ strategy allows the property to be promoted at the minimum price that the seller is willing to accept. This encourages offers that are in line with the sellers’ expectations and will quickly identify if the property is overpriced based on the level of interest.
Price Range – Providing prospective buyers with a price range gives the seller leeway when it comes to ‘feeling out’ the market but also allows them to stay in control. Displaying a price range gives buyers a clear indication of price expectation and services a wider range of buyers at varying price points.
- No strict time constraints which allows the seller more time to consider offers
- You can take multiple offers and select the best one based on price, conditions etc.
- Transparency on price
- Cooling off period can be extensive which means a longer settlement/buyer backing out
- If the property sits on the market too long buyers will wonder ‘what’s wrong with it?’
- Can be a tedious process with buyers adding conditions to the sale eg. Building and pest, finance etc.
Additional Methods of Sale…
Off market properties are sold without any marketing or advertising except to a select group of clients that the agent believes may be interested. Whilst creating competition amongst buyers generally produces the best result, off-market sales have an element of exclusivity that appeals to certain demographics. Other reasons for conducting an off-market sale may include complex family situations such as divorce or death and the sale of an exceptionally unique or high-end property.
Expression of Interest/Tender
These methods invite buyers to submit their best and final offer on a property including any associated conditions by a specified date and time. Campaigns run for an average of 4-6 weeks and at the end of the sale period the vendor will review submissions and choose the most attractive offer. This technique is similar to a silent auction, combining the seller-control of a private treaty sale and the urgency of an auction.
For Sale By Owner
‘For sale by owner’ involves the owner taking on the sale of their own property without the assistance of a real estate agent. Although the idea of not paying commission is tempting, this method rarely results in an optimal price being achieved due to the lack of competition that would normally be created through an agents marketing campaign and network of buyers. Owners will also often believe their home is worth a higher amount than what is reflected by the market due to emotional attachment which can also hinder the sales process.