Private Treaty vs Auction

A private treaty, more commonly known as your standard residential property transaction, consists of the seller, usually with the advice of their sale agent, setting a price to sell their house for. From there, interested buyers negotiate over time with your agent who does their utmost to seal the deal as close as possible (or above) that agreed upon price.

 

An auction differs in that your house can sell in a matter of minutes, but your marketing campaign must be extensive and usually goes for weeks. On the day of the auction, the bidders your campaign has attracted compete against one another in an adrenaline filled event that sees your home sold (hopefully) …to the highest bidder so long as that bid is above or equal to your reserve price.

 

So how do these two methods play out in the current market?

 

Well as we discussed in last week’s blog, we are currently in a seller’s market. So, if you’re tossing around the idea of selling your property you might be thinking an auction is the way to go!

 

In theory the maths seems simple. Plenty of buyers + auction = the perfect plan to drive the price up with little effort; as the competition would do all the work for you… however, here are some pointers you may like to consider.

 

As a vendor selling your property at auction:

  • you’re likely to face larger marketing costs than with a private treaty, on the plus you’ll have a written marketing plan so you can pre-arrange all your appointment times to suit your schedule.
  • If you’re selling an apartment in a block with other’s just like it for sale, an auction isn’t going to work. People will already know it’s worth and the excitement of the day will do little to increase the sale price.
  • You can choose a reserve price and a settlement date to suit you, although this also occurs in private treaty sales there’s just more negotiation with the buyer that you have to consider.
  • The inherent nature of an auction drives sale price; through a sense of urgency buyers bid and are encouraged to compete, at times breaking any price barriers. However, consider the first home buyer or those not well seasoned, playing with large numbers at the table can scare people off. So knowing your target buyer is a must.

 

You should also know that the auction clearance rate published on 7th of March was just 59%, maybe those odds look good to you… but if not, then fear not! When stock is low like it is now and properties have multiple offers, a private treaty is basically a silent auction and can give you the best of both worlds.

 

As the vendor of a private treaty:

  • You get far more control over the sale process.
  • If there are multiple offers, buyers will be more likely to bid their highest offers rather than just the next highest bid.
  • Your buyers will feel more confident, knowing they have the flexibility to negotiate and have “conditional offers” which are subject to things like finance and a building and pest inspections. Remember how important these can be?
  • You’ll have time! Time to consider all offers, time to extend the sale period and time to move.
  • You’ll save on marketing costs too.

 

For the majority of people, making a huge life changing decision under the stress and pressure of an auction does not seem appealing.

 

As a vendor, I would recommend reflecting on whether you believe an auction holds much value in our current market, given the points above and the fact that a private treaty has the power to operate as a silent auction as well, I’d say nope!

 

But if you’re still on the fence… why not chat to one of our sales team at Clark Real Estate for a more personalised opinion.