Selling a home can be stressful and overwhelming. Whether you’re looking to sell an investment property or a home that you’ve built memories in, when the time comes there will be many questions to answer.
One of the most significant choices you’ll have to make is deciding which selling option is best for you. Your two main choices will be to either go to auction or look for a private sale/treaty. But what is the difference?
The main difference between the two is that a private sale will often have an asking price — the amount that you will suggest to interested buyers, which will be based on what you determine as the value of the property. Conversely, an auction may or may not have a reserve price, but ultimately the selling price will come down to the highest bidder, which then determines the market value.
In today’s real estate market, you have the benefit of choosing which option is best for you, but it is essential to know the pros and cons of each before you decide.
Bidding can push up your final sale price. Without naming a set asking price, you are less likely to cap your sale price. In a public auction, there will typically be a starting bid and the sale price can go up from there.
Fixed closing date. An auction typically has a four week marketing period with a fixed end date — the auction date. A clear end date usually brings the sale process to a head and encourages bidders to put their best foot forward by the auction date.
You can set a reserve. You can set a reserve — the minimum amount that you are willing to accept for the sale to go through. This can give you the relief of knowing that you will at least receive your base price, plus the opportunity to sell for more — failing this, your home will not be sold.
There is no cooling-off period. Once your contract is signed, you don’t have to worry about the buyer changing their mind, which forces you to start the process all over again.
It broadens the scope of interested buyers. Without naming a set price, you can gain more interest from buyers whose maximum budget would be lower than what your fixed amount would be. While these buyers might not be able to offer what you are looking for, the additional interest may also encourage competition among better funded buyers and drive the price up.
The fees can be higher. Even if your house is “passed in” at auction — meaning it doesn’t sell — you still have to pay the auctioneer’s fee. There are no auctioneer fees for a private sale so the fees are typically less assuming the home is marketed for the same period of time.
It may turn off some buyers. Some buyers would prefer not to purchase with the sense of urgency that comes with auctions. Additionally, some bidders may not be able to secure financing in time to be able to make an unconditional bid at auction, especially when banks are slow to provide pre-approval. While bidders can make an offer subject to finance, this is generally not appealing for sellers. Whereas, a private sale often gives buyers a chance to get their financing in place.
Buyers may get the wrong impression. Auctions, like the property market, can have ups and downs. For this reason, if your home passes in or the bidding process is slow, it can send the wrong message to any potential buyers about the value of your property — or turn them off altogether.
You have time. Without the time-sensitive pressure of the auction, you can consider all offers and negotiate their initial bid. You also have the chance to wait for an acceptable offer that works for you.
You may attract more buyers. The nature of an auction can be slightly confronting and overwhelming for some buyers, and even sellers. With a private sale, you will attract both types of people — those who don’t mind the gavel, and those who would prefer to avoid it.
You have more privacy. The terms of the contract, as well as the offers, are all done through your agent alone, meaning any little details that you don’t want to be made public will stay private.
The sale can fall through. Private sales come with a cooling-off period, and the length of this period varies by state. It gives the buyer the chance to back out of the transaction within the agreed-upon time frame. Additionally, buyers who are subject to finance (versus being pre-approved) are at the mercy of the banks, meaning that you are as well.
It can take longer to sell. When there is no closing date, buyers may not feel any pressure to act quickly. An “interested buyer” may take weeks or longer to finally take the plunge and make an offer.
You may not receive your asking price. In a public auction, you set the reserve, and the sale price can go up from there. However, in a private auction, the opposite is true: you set your asking price, and the buyer has the opportunity to negotiate down. Depending on the number of offers you receive, you can end up taking a lower price than you originally wanted.
Which Option Is Right for You?
If you are still unsure as to which option is best for you, your first step is to find a great real estate agent who can help you through the process. They will be able to inform you of important factors to consider, such as:
- The current market trends and comparable property sales
- What is common in your city or suburb
- The property type, such as a unit in a large block or a home with custom features, and how this might impact your selling route
- How quickly you would like to sell
And, if you want to guarantee you reach your sale price no matter which selling route you take, you can explore the option of a Home Price Guarantee with Brickfloor. You’ll receive a commitment from the outset to buy your home for an agreed-upon and fair price – in the event that you don’t get an equivalent or higher offer during your auction or private sale campaign. Essentially, you’ll be locking in your reserve or asking price to ensure that you sell for at least that amount, or more!