Selling by Auction
An auction by nature creates urgency as there is a definitive time in which the buyer must act or they risk losing their opportunity to buy the property. Setting an auction date, groups all interested buyers together at the one time, creating a competitive environment and the greatest chance to achieve the highest possible price. The theory of an auction is that your home will sell at true market value at that particular time.
Unless the property is passed in and consequently becomes listed ‘for sale’, the seller knows exactly when a sale and settlement will occur. The benefit of this is being able to plan ahead with your next move.
During the marketing campaign, buyers are usually given a price guide which can vary throughout the campaign depending on the amount of interest in your property and feedback received from buyers. The great thing about auctioning your home is that there is no price limit only a minimum amount that you decide you are prepared to sell for, which is called the reserve price.
Setting the reserve should be an analytical decision based on buyer feedback obtained by your agent during the campaign as well as comparable sales in your area. By now you should have a good idea as to how many buyers are genuinely interested and how they feel about your home in relation to the price that has been quoted to them.
The marketing undertaken for an auction property needs to be more focused and can often cost you more. A date is set and you need to create strong buyer interest in a short amount time. Your agent will recommend using a multi-faceted approach, whereby you advertise across a number of different mediums each week until auction day.
Once the hammer falls, the property is sold and there is generally no cooling off period for the buyer or the seller. Buyers need to conduct building inspections and ensure their finance is approved prior to bidding at the auction. If the property fails to sell at auction, you can continue marketing the property with an asking price. It is likely that one of the buyers, often the highest bidder will come forward and negotiate a sale with the agent on your behalf.
Selling by Private Treaty
Sale by private treaty requires the seller to set a price from the beginning of the campaign. Your agent and our tips on Property Value can help you with this process. Many sellers have a tendency of initially setting a higher price as they think buyers are likely to negotiate the price down. Doing this can be counterproductive, so this is when an experienced agent becomes a vital source of information. Ask for their guidance when establishing your asking price and refer to comparable sales in your area.
In general, sale by treaty gives the seller greater control over the sale, more time to consider offers by potential purchasers and the ability to extend the time the property is listed on the market (although this often leads to potential purchasers wondering why the property is not selling). Plus potential purchasers must make offers on your property ‘blind’, this means without knowing what other buyers are willing to pay.
Generally, private treaty sellers can negotiate the price and sale terms with the buyer. Private treaty sales usually have a cooling off period (5 days in NSW, 3 business days in Victoria, 5 days in QLD, 4 business days in NT, 2 business days in SA ), this means that once a price has been agreed between buyer and seller, the sale is still subject to conditions. For example the buyer may have requested a building and pest inspection or may require finance approval.
Selling by Expressions of Interest
Sale by Expressions of interest (EOI) is when you invite buyers to submit an offer to purchase your property by a specified time and date. Each potential purchaser puts forward their best and final offer (in writing).
Generally your property will be on the market for 4-6 weeks to enable you to promote your property effectively and to ensure ample time is given for buyers to look through the home, finalize their finance and determine the price they are willing to pay.
When submitting an expression of interest, you need to include the a price you are willing to pay, conditions of sale, such as settlement dates, finance conditions and inclusion and exclusions of the sale.
At the end of the sale period the vendor will review submissions and choose the expression of interest that interests them the most.
If an acceptable offer is not found by the purchaser, the property may be place on the market as a private treaty sale or EOI’s may be called again.*
Make sure – if you are putting in an offer, remember that you may only have one chance to secure the property, so put your best foot forward so you’re not disappointed later on.*
Expressions of interest provide you with the benefits of a private treaty sale but with the urgency of an auction without the potential stress
What to do on Auction Day
On site auctions require preparation by the seller as there is likely to be a lot of people in your home for one last inspection, so be sure your home is still looking its best. You may pick up a buyer at the last minute and you certainly don’t want to deter buyers that are there to bid.
Inform your neighbours of the auction day and time, ask that they do you a favour and keep noise to a minimum or go one further and invite them to the auction.
A professional auctioneer will make sure the auction process happens in an orderly and legal manner. They will be able to encourage competitive bidding and a fun, energetic atmosphere. Your agent will assist the auctioneer by encouraging buyers to bid and will also need to confirm with you once your reserve price has been reached.
Set up a suitable area to hold the auction. Usually it is held in the garden or on the front footpath, however your agent and auctioneer will be able to guide you. Make sure you agree with your agent whether they want you to be present at the auction or to hide away. The auctioneer and/or agent may feel it is better that you are not present at the auction, as in your excitement you may telegraph your position to home buyers and therefore affect further bids.
All bids at the auction must be acknowledged and recorded by the auctioneer or their assistant; this ensures there is no misunderstanding over who has bought the property and for how much.