Which Method Of Sale Should You Use?
There are a number of ways you can choose to sell your property through Raine & Horne Glenelg. The method you choose should match your primary need with respect to price, urgency and privacy. The most commonly used methods of sale are auction or private treaty. Both methods have advantage and disadvantages based on the type and location of the property, nature of the market and the preferred time frame. If your preferred timeframe is a short campaign, then auction is recognised as being an effective way of creating wide public interest and reaching a large number of prospective purchasers in a short period of time.
The main reasons sellers choose Auctions as a method of sale are;
- Auctions work to a plan; the marketing strategy is carefully thought out, documented, and especially tailored to a firm date of sale.
- Convenience; a short but comprehensive marketing campaign means less disruption to family life. Set inspection times for potential buyers are arranged at the outset to offer convenience to you. Due to the short campaign the number of 'open for inspections' is also limited.
- Best Price; properties marketed using the auction process often achieve prices well in excess of owner's expectations. There is no upper limit for bids at an auction and competitive bidding is an auction atmosphere often enables sellers to achieve a sale price in excess of their reserve or what was thought to be a fair market price.
- Maximum Exposure; auction campaigns are designed to ensure the property achieves a higher level of interest and genuine buyers.
- Auction lets the market determine the market price; auction is a great method of determining the right value by eliminating the price and letting the market determine what the property is really worth.
- Specified auction date; auction creates a sense of urgency. Prospective purchasers must complete their enquiries within a certain time period. There is a definite time limit by which the buying decisions must be made.
- Auction is conclusive; when a buyer purchases a property at an auction the contract is exchanged and is not subject to a cooling off period when the contract can be rescinded by the purchaser.
- Immediate exchange of contracts; purchasers must sign the contract and pay the deposit on the fall of the auctioneer's hammer. Immediate exchange of contracts safeguards against loss of contract and sale.
- Reserve price; there is a reserve price set and the property cannot be sold below this price without the approval of the owner. The reserve need not be set until just prior to the auction. The sellers reserve is not disclosed.
The main reasons sellers choose Private Treaty as a method of sale is;
- Predetermined asking price; under private treaty the property goes onto the market with a predetermined asking price agreed between the seller and the agent. The asking price is based on the market analysis and opinion of the current market conditions agreed between the seller and the agent. In general the asking price or a range to the asking price is publicly stated. Often the predetermined asking price turns out to be the maximum price or the basis of lower offers up to that price.
- There is no official sale date; the sale of property by private treaty is open-ended and there is no fixed sale date until an offer is accepted by the seller
- Best price; the best price achieved through private treaty generally relies heavily on the agents negotiating skills and the strength of the marketing campaign to create buyer competition for the property. If the marketing campaign fails to gather momentum, the seller may only be negotiating with a single purchaser.
- The purchaser's offer is never disclosed to other purchasers; unlike an auction, purchaser's offers are never disclosed to other purchasers, so each purchaser has to guess what other purchasers may offer. This may result in a larger incremental jumps between offers compared to auction increments. Potential buyers generally believe they can start the negotiation by either accepting the pre-determined price or by offering a lower price, with the aim to raise the price to the asking price only if a better offer is submitted by another purchaser. At Raine & Horne our policy is that we only accept one offer from a purchaser, and request that purchasers make their offer their best and final offer to eliminate low ball offers and 'Dutch' auction strategies by purchasers.
- Private Treaty is more attractive to buyers; private treaty is more attractive to buyers who believe they are more likely to succeed in getting the property at a better price than they would by bidding in the competitive atmosphere of an auction, where they feel they are at risk of making higher offers than they would otherwise intended. Private treaty buyers often pursue conditional contracts, such as 'subject to sale' of their existing homes, and other conditions to suit their purchase. There is also more scope for the purchaser to rescind the contract under cooling off provisions which does not apply to auction conditions. Similarly purchasers typically often offer lower deposits in private treaty offers than the standard 10% deposit on fall of the hammer at an auction.
- The seller feels he has more time and control; sellers often feel they have more time to consider offers and assess market conditions through private treaty arrangements. Sellers often feel auction creates stress through urgency and believe private treaty is a calmer atmosphere to adjust sale price.
- There are more open inspections; depending on the effectiveness of the campaign the property can be on the market for longer. The longer a property is on the market, the more vulnerable the property is to price adjustments to entice more buyers.
Regardless of whether you decide to sell your property by auction or private treaty, you must decide whether you are going to conduct open inspections of your home. This decision is an important factor to the success of your sale... read more