Private Treaty vs. Auction vs. Tender

If you’re placing your home on the market this year, chances are you’ve seen the increase in auction and tender sales over the last few years. When you take into consideration that many homes have sold at or above market value this way, well, private treaty can seem outdated. That’s certainly not the case. Each sale method comes with its own benefits and drawbacks, that you’ll only fully understand if an experienced agent walks you through each process. But to give you a better understanding of each we’ll briefly discuss each process.

Private Treaty

Private treaty is the most common sale method for in Australia.

The process is fairly simple: you’ll set a price for your home, buyers will attend inspections and you’ll negotiate with buyers to get the best deal. Since most sellers and buyers are familiar with private treaty sales, you’ll get considerably more interest in your home if you choose this method. While that could seem like something you’d want, you should always remember that you’re setting a price for your home. And unless there’s sufficient interest in your home, buyers are unlikely to surpass that price.

In addition, if you price your home at what might be considered “higher than the market” you’ll find that you could push buyers away. If you end up doing this you’re risking selling your home for less than desired. As properties that have been on the market for longer tend to decrease in value over time.

This isn’t to say you shouldn’t sell through private treaty. Quite contrary, there’s a reason this method is so popular. It gets the results both buyers and sellers want. But if you’re selling through private treaty you need to ensure you get a good real estate agent. An agent with experience who’ll price your home to sell – usually that will be close to its market value.

Auction

In a robust property market an auction can yield great value, especially for in demand locations. Prices can skyrocket in a room full of eager buyers, as attendees will constantly strive to outbid each other. However, while an auction can be an unpredictable, it’s that unpredictability (or volatility) that can make it nearly impossible to sell a home at a favourable price in a subdued market.

Even if the market is robust that doesn’t always mean a higher price, as you’re really depending on how well the bidders receives your home at auction. In some cases buyers that attend the auction may not show too much interest in your home. And that’s ultimately what drives prices down.

If your property fails to meet its reserve price the first time around you may find it hard to sell through private treaty or tender later on. A dismal showing at an auction could cause the perceived value of your property to be negatively affected and drive interested buyers away in droves.

If you’re considering an auction for any number of reasons you’ll definitely want to sit down and discuss your expectations with an experienced real estate agent first.

Tender

You can easily find interested buyers through tender. As it’s a great way to weed out all the “window shoppers” and get straight to the savvy buyers who are ready to make a deal. When you put your home on the market through tender you’ll have to rigorously market it so that potential buyers are aware of the property and the closing date for bids. You won’t be stipulating a price, so essentially bidders will be blindly bidding on a property based on whatever criteria they’ve set in place. This can either lead to bids that are much higher than market value or bids that aren’t what you were expecting. However, you’re not obliged to accept any of the contracts you’ve been given, so getting bids that are lower than a price you deem reasonable isn’t completely distressing.

At the end of the day, you can discuss the way forward with your real estate agent if prices aren’t what you’re expecting, or the terms aren’t favourable.

What To Consider Before You Decide Which Way To Go

State Of The Property When Selling

Your home might be precious to you, but there may be flaws that prevent buyers from seeing that precious value. You always have to remember that sentimental value seldom translates to market value. Homes in disrepair may fair better at an auction or on tender where there could be developers and investors – ready to take on the challenge of turning your home into a gem.

Market Trends

When you’re preparing your home to sell you’d need to consider the current property market. Are there more buyers buying through private treaty, auction or tender. Is the market favoring one method over another or are buyer’s preferring one method over another?

How Quickly You’ll Need To Close A Deal

If you’re in a hurry to sell, you’ll want to choose a method that’ll get results quickly. Although this shouldn’t be as important as the aforementioned reasons, as rushing through a sale could cause your home to sell for less.

Before putting your home on the market you’ll want to consult with an experienced agent that has a thorough understanding of your area and the market. Someone who has your best interest at heart and is willing to listen to your concerns. But, will ultimately give you advice that will lead to an advantageous sale.