When it comes time to selling your house there are typically two ways this can be done, either by private sale or auction. While both methods of sale often result in your home finding a new owner, property experts suggest that there is a time when auctioning a home can be more effective. Let’s look at the pros and cons of private sale and auctions now, so that you can determine which is best for you.
When you decide to sell your home by private sale you will typically arrange for a real estate agent to sell your home on your behalf. The agent will then advertise your property for the price you would like to sell it for, and organise ‘open inspections’ so prospective buyers can view your property.
• You’re able to negotiate – A private sale enables you to negotiate the price and conditions of sale. This means that you and the buyer can work out an amicable agreement.
• Reduced advertising costs – The advertising campaign for a property under private sale is usually between $500 to $1600 with a seller saying what they’d like to include in the advertising package.
• Slower process – It can be a much slower process to sell your home via private sale. This is because you are waiting for prospective buyers to make an offer, which in some cases can take months, even years.
• Cooling off – Private sales are subject to a ‘cooling off’ period, which is typically 5 days. This time gives a prospective buyer time to reconsider their offer.
When you elect to auction your property you will hire a real estate agent who is an auctioneer. During your meetings with your agent, you will be asked to set a reserve price for your home and a settlement date. Your property auction date will then be set for a time in the near future, usually four to six weeks from the start of your advertising campaign. This will allow for the property to be advertised and for prospective buyers to view the property before auction. On auction day, the property will be sold to the person who makes the highest bid over your reserve price.
• Sense of urgency – An auction typically creates a sense of urgency. In this instance, this can see your reserve priced matched and then beaten, with you getting more for your property than originally planned.
• No cooling-off – A buyer of a property at auction is not able to change their mind about the purchase. They are also unable to negotiate or set any buying conditions, such as subject to finance. The buyer must have their finance pre-arranged.
• Advertising costs – The cost of advertising for an auction can be from $5,000 to $10,000. This is a cost that is incurred even if the property doesn’t sell.
• Not all auctions are successful – No bidders may turn-up at your auction or your reserve price may not be met, so your property will be passed-in. This means that you’ll have to look for alternative ways to sell the property.
All agents will say that the best way for you to sell your property depends on the type of property you’re looking to sell and on the current market. Your property location, how quickly you wish to sell and your budget for selling will also play a role in your decision.
If your property is unique and situated in a location that has a high demand for your type of property, then an auction may fetch a higher price for your home. In addition, home owners who are seeking a quick sale due to time constraints may also find going to auction favourable.
Private sale or treaty is often the preferred method of sale for properties priced under $300,000 and over $5 million. This is attributed to the fact that the low end of the market typically attracts inexperienced buyers, and the high end attracts buyers who wish to remain anonymous.
Regardless of how you choose to sell your property, all agents recommend spending some time and effort on its presentation. A well-presented property that is clean and tidy will always be easier to sell, than one that is not.
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