Selling through auction v.s. private sale: What’s the difference?

1 Feb 2019

Generally speaking, there are two popular ways of selling a property in Melbourne: through either an auction or a private sale. While both approaches can be effective, there are pros and cons to each method that are worth considering before putting your home on the market.

Here are some of the pros and cons of selling a property through an auction or a private sale.

The pros and cons of selling at auction

Pros

1. Buyers are put into a competitive environment

The competitive nature of an auction can sometimes get you a better price for your property. Potential buyers are put into a situation where they can see the other interested parties around them bidding, and in the heat of the moment, this can push them to pay more than they otherwise would to secure the property. Because of this, auctions can result in a quick sale too.

The competitive nature of auctions make them particularly suited for high demand or unique properties. An auction allows you as the vendor to leverage that interest into a potentially better outcome with the increased competition that comes.

2. You can be protected by your reserve price

A property only sells at auction when the highest bid passes the reserve price. This means you can protect yourself from having to sell at a price you're not happy with if the anticipated demand isn't there. Thankfully, if an auction ends below reserve, the highest bidder gets the first opportunity to negotiate with the vendor, so a sale is still possible.

3. The sale is unconditional

Sales made through auctions are unconditional, which means the buyer can't place any contingencies on their decision to purchase, like having their finance approved or having a positive building inspection returned. When the hammer drops, that's it – the house is sold and there's no cooling off period either.

What are the pros and cons of selling through an auction or a private sale?What are the pros and cons of selling through an auction or a private sale?

Cons

1. Auctions are public

If you're uncomfortable with the sale price of your home being public knowledge, an auction might not be the best way to go.

2. They can put off certain kinds of buyers

Auctions can be high-pressure and fairly intense experiences. Some kinds of buyers will be put off by the competitive nature of the auction process and may prefer simply to put in an offer for what they're willing to pay.

The pros and cons of selling by private sale

Pros

1. Easier and cheaper if there isn't significant demand 

If you know there isn't going to be a lot of demand for your property, a private sale is sometimes a wise choice. An auction isn't going to get a better outcome if the competition for the property isn't there to begin with.

2. Potentially less stressful

Selling a home at auction can be a stressful process. A private sale on the other hand is a much slower paced and gentler experience – your real estate agent will speak with potential buyers, offering them the property at the price you've decided. They can either accept at that price or put in a counter offer. Either way, it gives both sides more time to think without the pressure of intense competition.

Cons

1. Competition between buyers is less fierce

The main shortcoming of a private sale is the fact that the competition between buyers is usually less intense. If interested parties feel as though they don't have to compete as hard to win the property, they may be less likely to pay a higher price. Yet, as mentioned, if the demand isn't there anyway, an auction is not guaranteed to kindle it.

2. The asking price can be anchored in buyers' heads

A private sale involves naming your price and giving the buyer the chance to accept or reject it. With this comes the risk a buyer may have been willing to pay much more, but you would never know because you made your price too low. Choosing a realistic price around which you're willing to negotiate is therefore key.

To learn about how the expert team at Brad Teal can help you sell your Melbourne real estate, contact us today!


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