One of the most important decisions linked to selling your home is whether you opt for going to auction vs a private sale – so what do you need to know?
While both methods are known to have a long list of pros and cons attached, the decision regarding which option to choose usually involves a variety of contributing factors, such as the type of property being listed, it’s style, the location, the level of interest it’s received and even the time of the year. It’s a hotly debated topic within the real estate industry, but most in the sector tend to agree that deciding on an auction vs private sale should be assessed on a case by case scenario.
The Pros And Cons Of An Auction
A real estate auction is a public sale of a property, usually conducted by an estate agent acting as an auctioneer, and is governed by strict rules. The auction is advertised for a specific place, time and date. Prospective buyers bid and the property is offered to the highest bidder at the seller’s discretion.
Pro: Sense Of Urgency – With increased competition, going to auction with a set time limit increased pressure amongst potential buyers to commit thanks to “fear of missing out” syndrome. Ideally, this means the selling price often exceeds the expected value of the property.
Pro: Reserve Price Protection – An auction provides sellers with protection in the form of a reserve price, meaning that your property will not sell unless bidding reaches a pre-agreed level. The best part? The sky’s the limit for how much you could potentially sell for.
Pro: Set Terms – It’s common for auctions to be suited to situations where the owner wants an unconditional sale with no cooling off period, and usually have less settlement terms when compared to a traditional private home sale.
Con: Price – When compared to a private home sale, there may be additional costs involved to sell a property via auction in order to cover the cost of hiring a specialist auctioneer. It’s crucial to discuss and compare the costs to sell via auction or private sale with your agent.
Con: Specific Buyers – Generally speaking, auctions are not suited to buyers who wish to purchase subject to finance as often bids are unconditional. This limits the potential number of buyers that your property could appeal to, and potentially alienates first home buyers.
Con: Risk – Although the same could be said for traditional private home sales, if you take your home to auction, there’s no guarantee that it will actually sell despite the increased sales and marketing costs. Bidding can also negatively dictate the perceived value of your property.
The Pros And Cons Of A Private Sale
Pro: Price – Selling your home via a traditional private sale can often prove to be less expensive than an auction, as marketing campaigns for private sale properties are usually not as extensive. Be sure to shop around when it comes to selecting the right real estate agent.
Pro: Privacy – As a private sale occurs through a negotiation process, it enables you to keep the specific details of the sale out of the public eye. Buyers don’t know how many other people are interested in the same property, which is always good for the seller.
Pro: Flexibility – With less urgency to sell on the owner’s behalf, a private sale provides an opportunity for sellers to be flexible with what they will and won’t negotiate on with potential buyers, such as price, time frames and even inclusions.
Con: Processing Time – Because there is no specific end date to create a sense of urgency amongst potential buyers, a private home sale usually takes more time to be completely settled as opposed to an auction.
Con: Settlement Terms – It’s not uncommon for property auctions to essentially be sold “as is, where is”. In comparison, contracts for private home sales often include terms surrounding finance, building and pest inspections, and generally more “ways out” if and when required.
Con: Cooling Off Period – Although this varies depending on the state you live in, Victorian law dictates that a cooling-off period of three clear business days applies to private sales of residential and small rural property sales, meaning that your sale may still fall through.
Sourcing Further Advice On Going To Auction Vs Private Sale
A completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants, and aim to provide tangible real estate advice at no extra cost to them.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality or call Luke directly on 0414 757 705.
