Auction vs Private Treaty: which Sales Method is Best for You?

AUCTIONSELLING

28 Dec

You’ve decided to sell your home but you’re torn between Auction and the “standard” way to sell - aka Private Treaty Negotiation.

Let’s unpack which method might be best for You.

I recently met with a friend who has decided to sell his family home, and over dumplings and bao buns proceeded to quiz me about whether he should sell at Auction, or via the “standard way”, which is formally termed “Private Treaty Negotiation”.

The sales agent was pushing for an Auction sale but he was sceptical, and in this case, so was I.

Given what I knew about my friend and his wife, and the type of home they owned, it didn’t take me long to establish that Private Treaty was probably the best way to go given their circumstances.

But the question is, Why?

If you’re contemplating a sale but torn between which method is best, then read on as I’m going to break down the two main selling methods that a real estate agent will put forth if you end up becoming a seller.

Keep in mind, different agents will have arguments for an against each method of sale but what you as a seller need to remember is this:

Sales Agents often have their own agenda.

If an Auction sale works best for them, then Auction they will push.

Auction.

Let’s start with Auction, as this is the one that attracts the most questions.

Firstly, most sellers cringe at the thought of an Auction. It’s nerve wracking and commits you to an outcome on the spot… and I’m mindful that this doesn’t sit well with some.

One of the first things you need to ask yourself is, “how do I behave (or react) under pressure?” Because Auctions are not for the faint hearted, particularly if you are the seller.

Are you a decisive person, or do you prefer to have more time to sit with a scenario?

Do you avoid pressure situations?

Do you get nervous easily?

If your answer to the above is YES, you might want to reconsider selling via Auction.

The reason I want you to ponder these types of questions is because you need to know yourself well enough to decide whether the pressure of an Auction campaign is something you can stomach and willingly want to commit to.

Seller’s Advocacy.

As part of my Seller’s Advocacy Service, I work with sellers to better understand how they will emotionally react to the workings of an Auction campaign because in my opinion, there’s no point in putting yourself through a tonne of stress if you don’t have to.

So what is this stress I’m referring to anyway?

Well, the part I often witness to be the most stressful for sellers is Auction Day itself. The build-up to the big day and then the actual Auction getting underway can be all too much for some.

Knowing you have to set a reserve price (a minimum price the property can be sold for, that you agree with the agent and auctioneer prior to the Auction), and then possibly re-negotiate this price midway through the Auction taking place can feel daunting in the heat of the moment.

Not to mention the pressure the agent and auctioneer apply if you need to lower your reserve and accept less than what you expected.

And then there’s the disappointment if the property “passes in” - a term to describe a property that doesn’t sell at Auction.

I make it sound all too hard don’t I!

But in truth, there are many advantages to the Auction process.

The key one is this - you are guaranteed a result. (It just might not be the one you want. Or it may be better than you imagined!)

The house either sells or it doesn’t.

If the market is hot with buyers for your type of property, then Auction can sometimes be the way to go because multiple bidders will push the price up through fierce competition. I’ve seen this happen on numerous occasions and the sellers were delighted with the outcome.

THIS is a factor to really consider. If you believe there is significant demand for your type of home and bringing a crowd together in one place, on one specific day will likely generate multiple bidders and perhaps a bidding war, then Auction could be right for you, if you’re comfortable with the process in general.

On the other hand, if your home is unique and will only appeal to a certain kind of buyer, you may be better off without an Auction.

Who is your Buyer?

Keep in mind, you also need to consider the type of BUYER your property attracts.

In my friend’s case, we established that the buyer crowd for his property is likely to be first home buyers. I explained that this type of buyer often shys away from buying at Auction because they’re inexperienced and nervous in this setting, so it may be best to run a Private Treaty sales campaign so as not to exclude these people as potential buyers.

Private Treaty Negotiation Unpacked.

Private Treaty sales are a lot different and the process presents a much less stressful selling environment for the seller.

Basically, you and your sales agent will set a price expectation and then build the campaign around this.

There are no firm deadline dates for the sale to complete and you simply list the property for sale and manage offers from buyers as they come in.

As with an Auction, Private Treaty Sales can also work well when there are multiple buyers.

This is because your sales agent will receive multiple offers from buyers who know they are in competition with others.

It’s a way to flush out the highest price a buyer will pay because sometimes that buyer will only get one opportunity to put their best foot (offer) forward or risk missing out on the property to another buyer who offers more favourable terms, such as a higher price.

You can then meet with your agent in a less pressured environment to discuss all the offers received and choose the most favourable one for You.

Keep in mind, Private Treaty sales are often guided by Price whereas Auction Campaigns lead without the seller’s expected Price as the guide.

Ultimately, the decision to sell by Auction or Private Treaty is a personal one.

To summarise, you should weigh up the following:

the demand for your type of property
the kind of buyer who will likely buy it
your ability to make decisions under pressure
your preference on how to bring about a result
the timeframe you wish to have your property sold within

Consider the above and then make the decision that best suits You.

Remember, there is no right or wrong method, but choosing the best one for you and your situation will have a positive impact on the process going forward.

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