Selling a home is something you can do in a number of ways. In order to achieve the best results and sale price for your individual circumstances, you need to know the different types of methods used for selling property and then work with your agent to choose the right method for you.
Here’s what you need to know about the three main methods of sale and what factors influence the choice of method for selling.
Methods of sale of property
There are three main methods used to sell property:
- Private treaty
This is the traditional method of selling homes. As the vendor, you set the sale price, which should be based on a valuation provided by your real estate agent. Your agent then negotiates privately with each potential buyer on your behalf to achieve a sale price close to or (ideally) above the sale price you have set.
- Your property remains available until contracts have been exchanged. If in the meantime someone makes you a higher offer, it is perfectly legal for you to accept this offer.
- You can take your time considering different offers as there is no definite sale date, unlike with an auction.
- The buyer can withdraw their offer at any stage (up until contracts have been exchanged) if they change their mind. In addition, most states in Australia offer a five-day cooling-off period during which a buyer can change his or her mind.
- You need to get the sale price exactly right – too low and you will lose money, too high and potential buyers might be discouraged.
- Public auction
Property auctions are the same as any other type of auction. Interested bidders gather in a location, usually outside the property itself. Your real estate agent starts the bidding, and when only one bidder remains, that person ‘wins’ the property.
There is no sale price set prior to the auction – instead, the agent will usually offer a guide price range. This makes people aware of whether or not they have a chance of winning the property.
You also have the option of setting a ‘reserve’ price, which is the lowest amount you’re prepared to accept for your home.
As some buyers are discouraged by the public auction process, nowadays some agents prefer to hold a ‘boardroom auction’. This is held in the agent’s office rather than in the street in front of your property, so it is less intimidating and more relaxed. There are no onlookers and everyone there is a serious bidder, so the process is usually quicker than holding an auction in public.
- Auctions encourage competition between buyers, which is enhanced by the excitement on the day, potentially pushing the property price up.
- It gives you a definite date to work towards so you can plan your marketing and open homes effectively.
- Even if your home doesn’t sell on auction day, most agents negotiate a sale in the following days.
- The sale price is public, and if your property ‘passes in’. where it fails to meet the guide price, this will be made public, which can damage its future sales potential.
- Some buyers dislike the auction process and might be discouraged from attending.
- Blind auction
This method is also known as a silent auction, or buying a house by expression of interest. Your agent will advertise the property and the closing date for expressions of interest. Interested parties then make offers for the property without knowing what amounts anyone else is bidding.
- You only get to make one expression of interest in real estate so many people will make their highest offer straight away as they don’t want to miss out.
- You can end up gaining as people offer what they are prepared to pay – they don’t know what other interested parties are offering and they know they can’t try and outbid others later on.
- People might not know the market value of the property so they make offers that are far too low. Once the highest bid has been accepted, you are not then allowed to accept any other offers that might be made for your property.
- Blind auctions can have high marketing costs because you have less time to make sure buyers know about the property and the closing date.
What factors influence the choice of method for selling a property?
The right method for you will depend entirely on the outcome you want. If you need a quick sale, a public auction is the best way to achieve this. Even if your property passes in, it still has a high chance of being sold on auction day as your agent can negotiate with the highest bidder once the auction has closed.
If you don’t want the stress and time constraints of an auction, and you want control over who you sell your property to, a private treaty is the right method for you. However, it isn’t ideal if you need a quick sale as you don’t know when the offers are going to come in.
Blind auctions are normally used to sell prestige properties as interested buyers are likely to have more money to offer. However, this is quite an unpredictable process, so you need to be willing to gamble.
More information about selling your home
The most important thing when you are selling your home is to have a reputable and experienced real estate agent to guide you through the process. They will understand the local market and take the time to establish which method would work best for you in your individual circumstances.
If you would like more help and advice about selling your home, please contact us, and we will be happy to help.