Property news you need to know: The week ending 19 September
Smart Property Investment is pleased to present a weekly round-up of the biggest stories across property, investment, re...
Ready to sell your home or your investment property? Here’s how to decide if you should put it up for auction or sell it by a private treaty.
When you’re ready to sell your home or investment property, it typically boils down to two options: should you put it up for auction or sell it through a private treaty?
While both selling methods have their pros and cons, they can both be effective if carried out in the right location, in the right market at the right time.
If choosing between auction or treaty sounds like a minefield to you, don’t worry! We’ll unpack all the benefits and downsides of both selling methods and discuss the factors that can help you decide which method is the right fit for you and your property.
What is a private treaty?
In a private treaty sale, the seller or the real estate owner sets the price that they want for their property. Afterward, the real estate agent privately negotiates with potential buyers to get the best possible sale price.
To give interested buyers an indication of the price the vendor or seller is expecting to get or willing to sell for, a guide price is usually indicated in a private treaty listing.
Private treaty sales are not always transparent, because the number of other people placing offers for a home is not disclosed.
Pros and cons of private treaty
What is an auction?
Auctions are public events in which potential buyers bid on a property at a specified location and time. The seller and their agent will set a reserve price for the property, which is the minimum price that a seller would be willing to accept from a buyer.
The property is sold to the highest bidder, as long as the bid matches or surpasses the reserve price. If the reserve price is not met, the seller is not obliged to sell the property (even to the highest bidder).
Due to the pandemic, there has been an increase in the number of auctions being held virtually. If you’re unfamiliar with how online auctions work, we’ve got you covered. Here’s all you need to know about how online auctions work and tips on how you can win them.
Pros and cons of auctions
Auction v private treaty: Which is the right option for me?
To help you decide which sale method is most appropriate, here are some of the factors that your real estate agent will evaluate.
If your property is located in the biggest property markets (such as Sydney and Melbourne) or within close proximity to a central business district (CBD), most agents would typically recommend selling by auction, due to the high demand for these areas and because buyers are more familiar with this sale method.
If your property is not in any of these areas, your agent may still recommend an auction if your property has unique or high-end features that may attract interested potential buyers.
The type of property
The suitable sale method for your property will also depend on its type and its features. For example, if you are selling a standard apartment with a widely known value due to similar properties in the area, a private treaty may be the best option for you.
Current market conditions
One way to determine buyer sentiment within a property market is by the auction clearance rates (ACR). ACR refers to the percentage of properties sold at auction on a particular period (weekly or monthly).
To calculate the auction clearance rate, you divide the total number of properties sold at auction by the total number of properties listed for auction. High clearance rates can indicate strong demand in the market, which increases your chance of selling your property.
Other metrics to account for include days on market (DOM), the current demand to supply ratio (DTS), rental yields, and vacancy rates. These can help you decide whether a private treaty or an auction will be the most effective selling method.
On that note, don’t forget to check out our website’s News Section to make sure you’re up to date on the latest property market reports, insights, news about Australia’s real estate market.
Smart Property Investment reports on the capital city auction clearance rates each week.
If you want to check the market conditions on a particular suburb, head on over to our Best Suburbs page to get an insight on vital market info, including growth rates, vacancy rates, median house prices, time on market, and key demographic data.
Your expected selling timeline may also help you decide whether a private treaty or public auction would be more suitable. For example, if you are in a hurry to sell the property, an auction may be more suitable since it has a “deadline”.
To summarise, here are basic points to help you reach an informed decision about what selling method to use.
An auction may be the right option if:
Choosing a public auction may be more appropriate if:
Just remember that these are just general recommendations, and it’s still best to consult your real estate agent and do your due diligence when choosing the selling method for your property.
Smart Property Investment provides Australian property investors with must-have insight, strategies and real-life experiences to help guide successful buying and selling decisions in the Australian property market. Tune in to our podcasts covering a variety of topics related to the real estate market. You can also follow Smart Property Investment on social media: Facebook, Twitter and LinkedIn.
A real estate agent is a licensed professional authorised to act as a representative for buyers or sellers in a property transaction.