This article will unpack the differences between auction versus private sale, exploring the pros and cons to equip you with knowledge for your next property transaction.
We all know that navigating the real estate market can often seem like deciphering a code, especially when it comes to understanding different methods of buying a house in Australia. Two common methods are auctions and private treaty sales, each with its own set of advantages and disadvantages.
What is an Auction and How Does It Work?
An auction is a public event where potential buyers place bids on a property. The property is sold to the highest bidder, providing the bid reaches the reserve price set by the seller.The allure of selling property at auction comes from the potential for a higher sale price.
The competitive nature of bidding can drive prices up, particularly in a strong property market.
The contract of sale is signed immediately, with no cooling off period, and the buyer usually needs to pay a 10 per cent deposit on auction day.
However, it’s important to note that auctions can be emotional and unpredictable. Buyers must review the contract of sale and do their homework prior to auction.
Understanding the Concept of Private Sale or Treaty
A private sale, also known as a private treaty, is a method where the property is listed for sale with an asking price.
The seller or their real estate agent negotiates with interested buyers to agree on a price. Unlike an auction, a private sale offers a cooling-off period, giving the buyer the option to withdraw from the sale within a few days after signing the contract of sale.
Private sales can offer a less stressful, more controlled environment compared to auctions. The seller has the ability to set the asking price and can negotiate the terms and conditions of the sale.
However, it can take longer to sell a property through private treaty, particularly if the asking price is too high for the current market conditions.
Pros and Cons of Selling Your Property via Auction
Selling a property at an auction may result in a higher sale price due to competition among bidders. Auctions also offer the protection of a reserve price, ensuring the property won’t sell unless bidding reaches a predetermined minimum.
Another advantage is the immediate contract of sale, with no cooling off period.
On the con side, if bids don’t reach your reserve price, the property may be passed in, which can potentially harm its market perception.
Additionally, auctions involve upfront costs, such as marketing and auctioneer fees, which the seller will have to pay regardless of the auction’s outcome.
Advantages and Disadvantages of Private Sales
Private sales give sellers more control over the sale process, including the flexibility to negotiate the price, sale terms, and settlement periods. This method of selling also offers great privacy compared to public auctions.
However, cons of private sales include the possibility of setting the asking price too low or too high, which can deter potential buyers or undersell your property. Also, the process can take longer, which could be a problem if you’re in a hurry to sell. These are some of the risks of selling privately.
Which Method is Better for Buying a Property?
From a buyer’s perspective, auctions can be exciting but potentially overwhelming. The competitive environment can push prices up, so it’s important to set a budget and stick to it on auction day.
Buying a property by private sales, on the other hand, offer buyers more time to consider their purchase, carry out inspections, and get home loan pre-approval. They also allow room for negotiation on price and terms.
Getting Advice from Real Estate and Home Loan Specialists
Whether you’re buying or selling, it’s vital to ask your real estate agent about the benefits of auction vs private sale for your specific situation. Home loan specialists can also provide advice on the best lending rates and help you understand what you can afford.
In conclusion, both auction and private sale have their place in the property market. The best method for your home will depend on a variety of factors including the type of property, the local market conditions, and your personal circumstances.
FAQ about Auction Versus Private Sale
Why do houses sell at auction Australia?
Houses sell at auction in Australia for a number of reasons. Auctions can be a quick and efficient way to sell a property, and they can also generate a lot of interest from buyers. Additionally, auctions can often result in a higher sale price than a traditional sale.
Does it cost more to sell at auction?
In some cases, it can cost more to sell at auction. This is because the seller will typically have to pay a commission to the real estate agent who conducts the auction. However, in other cases, it can actually be cheaper to sell at auction. This is because the seller may be able to avoid paying some of the costs associated with a traditional sale, such as marketing and advertising costs.
Do all houses go for auction in Australia?
No, not all houses go for auction in Australia. Some sellers prefer to sell their property through a traditional sale, such as a private sale or an open listing. However, auctions are becoming increasingly popular in Australia, and more and more sellers are choosing to sell their property this way.
How do Australian property auctions work?
Australian property auctions typically work in the following way:
- The property is listed for auction and advertised to potential buyers.
- On the day of the auction, the property is presented to the buyers and they are given the opportunity to inspect it.
- The auction begins and the bidding starts.
- The bidding continues until there is only one bidder left.
- The property is sold to the highest bidder.
How do you buy a house at an auction in Australia?
If you are interested in buying a house at auction in Australia, you will need to do the following:
- Register to bid at the auction.
- Bring a deposit with you to the auction.
- Be prepared to bid aggressively.
- Be prepared to walk away if you are not happy with the final price.
