Private sale vs auction: what to consider

What you'll learn

• What's involved in a private sale
• What's involved in an auction
• Pros and cons of private sales
• Pros and cons of auctions

 

If you’ve decided to put your home on the market, you may be wondering whether to sell by private sale (private treaty) or by auction. 

 

A private sale involves listing your home for a price or by negotiation. Potential buyers negotiate with your real estate agent to purchase the property.  

 

Auctions involve listing your house without a set price and holding a marketing campaign to promote it, before selling it at auction. 

 

What’s involved in a private sale?

1. Choosing an agent

If you choose the private sale process, you can opt to use a real estate agent. Real estate agents have inside knowledge of what's happening in the property market, and they can help you list and advertise your property. It can be a good idea to interview several agents in your area and ask them how they would approach the sale of your house. Most agents will put together a report on your home, which will give you a good idea of the market value, their fee structure, the cost of marketing, and how they plan to market your home. 

 

2. Having photography done

High-quality images can help market your property to prospective buyers. Often your real estate agent will organise these as part of their services, otherwise, look for a photographer with experience in real estate photography. 

 

3. Listing your house

Together with your agent, you’ll select a date for your house to be listed. Depending on what’s agreed in the contract, your house may be listed on various websites and publications, and you’ll typically have a sign erected outside your home to advertise its sale. 

 

4. Staging your home

Some people choose to have their home professionally staged, using a staging service. Which means having a stylist choosing furniture and homewares that make the property look good. This is particularly useful when the home is empty. If you’re still living in the property while it’s on the market, you can stage the home yourself by removing clutter, tidying and cleaning it to look as fresh and minimal as possible. Read more tips on selling your home. 

 

5. Holding open homes or viewings

Potential buyers may want to view the property, and this can be done on open days or by private inspections. Your agent will work with you to find suitable days and times for viewings. Some vendors who value privacy will choose only to have viewings by appointment. 

 

6. Negotiating the sale contract

Once your agent has received an offer, they will present it to you for your consideration. An offer may contain a range of conditions, so it’s a good idea to speak to your solicitor to ensure you understand the conditions and how they impact you.  

 

7. Cooling off period

There may be a designated ‘cooling off’ period in the contract. This is a period of time (usually up to five working days) when the purchaser can change their mind. In some states it’s compulsory, and in other states, it can be added as a special condition in the contract. 

 

8. Completion

The settlement or completion date is the day the vendor must vacate the property and hand over the keys to the purchaser. Typically, a final or pre-settlement inspection should be arranged several days before the settlement date. This ensures the home is in the same condition as when it was sold and that any special conditions have been met. 

 

What’s involved in an auction?

1. Choosing an agent and auction date

Similar to a private treaty, you’ll want to find an agent who has the right experience to sell your property at auction. Once you select an agent, you should let them know you plan to sell via auction. You will then sign a contract which outlines the sale method, auction date, the agent’s fee structure, the cost of marketing, and the marketing plan. 

 

2. The marketing campaign

Often properties sold at auction will have short marketing campaigns of only a few weeks. There may be open homes scheduled and private viewings arranged. Buyers can make pre-auction offers, but it's up to you whether you want to consider private offers. If you receive an acceptable offer, your agent may advise you to bring the auction forward. 

 

3. Setting a reserve price

A reserve price is the lowest sale price you would accept for your home at auction. Typically, you will set your reserve price in consultation with your agent either on the day or a few days beforehand. It’s important to consider the feedback your agent received at open homes before deciding on your reserve. Once the auction commences, you cannot change the reserve price. When the bidders reach the reserve, your property may be sold, so it's important that you are happy with the price. 

 

4. The process on auction day

Auctions are often held on-site or at a real estate agency. In some states, purchasers must register as a bidder before the auction commences, while in others they can bid without registering. The auctioneer (typically a registered real estate agent) will explain the terms and conditions of the sale prior to starting the property auction. The successful buyer is whoever bids the highest after the reserve price has been met. 

 

5. What happens if my property doesn’t reach reserve?

If your property doesn’t reach the reserve price you will have an opportunity to speak to your agent about further options for marketing your property. Some sellers choose to list their property as a private sale following an unsuccessful auction. 

 

Pros and cons of private sales

Potential benefits

• You won’t lose potential buyers who may have restrictions on their finances or can’t organise finance in time for the auction.
• It gives buyers who might require special conditions an opportunity to undertake thorough pre-purchase inspections.
• You could negotiate a higher price with a purchaser who requires special conditions on the sale. 

 

Potential disadvantages

• There can be less urgency for purchasers to sign the sale contract.
• Finding a buyer can take longer than selling at property auctions.  

 

Pros and cons of selling by auction

Potential benefits

• Auctions can drive urgency and competition within the potential buyer pool, thereby achieving a higher sale price on the day.
• Offers are unconditional, so you don’t need to wait on conditions to be met, taking some uncertainty out of the sale process.
• If successful, the process is relatively quick, with a settlement date nominated at the outset. 

 

Potential disadvantages

• Some buyers are put off by auctions and are less likely to attend.
• If the auction isn’t successful, it can lower the perceived value of your property.
• Your buyer pool may be smaller, as those who can’t buy unconditionally won’t be able to bid on the day. 

 

How do I choose a sales method?

There are many factors to consider when deciding whether to list by private sale versus an auction. These factors include your personal circumstances, such as if you’re looking to purchase your next home, and the saleability of your property. 

 

Here are some questions to consider when choosing a sales method:

• Is your home likely to have a lot of interest from buyers, or does it have aspects that might mean it takes longer to sell?
• Are similar properties to yours selling quickly?
• Is there any urgency around the sale?
• Are there any direct comparisons in recent sales in your area that would indicate a likely price?

 

If you’re thinking about selling, a real estate agent can help you find a sales strategy for your property.

 

Buying your next home

Before you sell your current property, you may be thinking about purchasing your next home.   

 

If you need to secure a new home loan while waiting to sell, read our article on Home Loan Portability.