Houses can be sold via private treaty, auction or expression of interest, and the method that’s best for you will depend on the type of house, your target buyer and your personal circumstances.
Private treaty is method of sale where a home is advertised with a set price or guide that is open to negotiation. In this instance, a buyer submits an offer to the agent who then presents this to the vendor. The agent will handle negotiations between you and the buyer, and will advise you whether to accept or decline an offer based on their estimation of the value of the property and market expectations.
- Private treaty makes it easier for a buyer to determine a price, instead of wasting time inspecting properties outside their budget.
- Private treaty allows a standard cooling-off period, which may be important to many buyers. This varies from state to state, but gives buyers time to carry out building and pest inspections, or employ a conveyancer to conduct investigations. This cooling-off period is not an option for houses bought at auction as these inspections would have been completed beforehand.
- Private treaties are often seen where there is a high supply of a certain property type.
- By putting a price on a property you may underestimate its value. Usually, if numerous buyers are interested, competition between them may result in higher offers.
- Auctions have a scheduled date for the sale, while private treaties, having no set timeframe, may lead to the property being on the market for an extended period of time.
Everyone obviously wants top-dollar when selling a home, but listing your property for a realistic price will give it the best chance of a strong result.
1. Compare similar properties To achieve a realistic result, you should look into the market in which you’re selling. Compare houses in your suburb, the block sizes, number of bedrooms, style of construction and condition of the property.
2. Consider buyer demand Taking into consideration market demand and the intended buyer, property type and style, your agent will advise you to list the property in a specific way and to include: a set price, a price range, on buyer application, or for auction.
3. Meet the market Overpriced properties sit on the market too long and become stale, making buyers think something must be wrong with the property. A better strategy is to meet the market with an achievable price. This price may even give your property a competitive advantage, as more interested buyers can lead to a better result than you expected.
It’s always tricky to know when to accept an offer. Of course, you want a high number, and that may well be achievable. Depending on the interest in your property, your agent may advise you to ”meet the market”. While this may sound slightly disappointing, it is realistic.
Once you have gone through the open-house process, any offers presented to you by the agent should be carefully considered. An offer is certainly open to negotiation and your agent will advise you if it is too low. Declining offers extends the period of time your house remains on the market, which can make it appear stagnant.
Your circumstances may also help determine when to accept an offer. If you have already bought your next house, you may need speedy access to new finance. You must also take into account any interest fees you may be incurring and try to avoid any bridging finance and its high interest rates.
An auction usually is held 30 days after the property is listed for sale. It is a commonly used method across Australia as a way of achieving high prices in a set timeframe. Real estate agents can advise whether this is suitable for selling your property and if so, will organise the auctioneer for you.
In an ideal auction scenario, numerous potential buyers place bids until the price reaches the reserve, which is the minimum price the vendor will accept. Once the reserve price is met, the auctioneer announces the property is ”on the market” and will be sold that day. As the reserve had been a secret up to that point, this often creates a second wave of momentum as buyers now know the property is within their reach and will be sold.
Bidding can continue beyond this until the highest offer is made, at which point the property will be sold to the highest bidder at the fall of the hammer.When the hammer falls, the property is sold to the highest bidder.
- Auctions often achieve the best results for a seller, creating a sense of urgency due to the reduced number of days that the property is on the market.
- Omitting the price also promotes a competitive buying environment.
- Auctions give the seller three chances to sell the property: before, during or after the auction takes place.
- Selling by auction can be stressful.
- If there is little interest in the property, there will be no excitement or momentum on the day.
- Auctions make some buyers wary, as the agent may have suggested a lower than realistic price guide to attract more buyers on the day.
How to set the reserve price for an auction
Auctions are a spectacle which, by their very nature, create a competitive environment, but there have been many different outcomes at auctions, both positive and negative.
If If bidding extends well beyond the reserve, it gives the seller a bonus above expectations.
But it is disappointing for everyone when the property does not reach reserve. No momentum is achieved, and potential buyers are left unsure about the price. In this case, the highest bidder is usually offered first chance at negotiating a price with the seller. If a deal can’t be reached, the agent may open up negotiations with other buyers.
Your agent will be able to guide you in offering a reserve which is low enough to encourage bidding but high enough that you will be satisfied with the result. As the agent has shown your house and discussed the price range with potential buyers, they usually have a realistic indication of the number of interested parties and what they are prepared to pay.
Should you accept a pre-auction offer?
There are risks involved with either accepting pre-auction offers or waiting until auction day. Some buyers do not like the pressure an auction creates, and prefer to present an offer beforehand.
Your agent should help guide your decision when faced with a pre-auction offer, as they will understand the level of interest in your property. By conducting your own research and discussing the offer with your agent, you will be able to determine whether it is competitive, or whether you should try to negotiate. Potential buyers could be deterred from attending the auction if the pre-auction offer is refused with little or no negotiation.
If you choose to accept the offer, the house will be taken off the market and auction will not go ahead. This may mean you have accepted less than what could have been achieved on auction day as sometimes a new prospective buyer, who has only viewed the home on auction day, becomes the highest bidder.
If you choose to go ahead with the auction and your home gets passed in, interested parties will know their bargaining power, particularly if there are no other bids.
In an expression of interest (EOI) or tender campaign, buyers submit their best offer and any conditions by a deadline, and the vendor chooses the most suitable offer, with the closing date creating a sense of urgency. Expressions of interest are common for very expensive or unique properties, and the private nature allows the accepted price to be kept discreet.