Understanding the various property buying processes is essential; whether you are buying or selling. In selecting a property, many factors need to be taken into account, including location, type, style, and degree of interest. When working with a good agent, vendors will be able to make informed decisions. You can discuss various sale strategies with the agent and explore what you need to consider. Find out what method is best for you by comparing the advantages and disadvantages of an auction versus a private sale.
Auction
An auction is a sale that takes place at a predetermined time, place, and date. A licensed real estate agent runs the auction with an auctioneer and sells once the reserve price (the lowest amount they’re willing to sell for) is reached. There are a differing laws and regulations governing auctions depending on the state and area. Check with your licensed real estate agent and local government for the appropriate requirements. Auctions are transparent but intense. They are designed to encourage competition between bidders, so there is no point in going to auction if the demand just isn’t there.
Pros
You have more control
You have control over the reserve price, auction date, and settlement date when you go the auction path. Unlike private sales where there’s more opportunity for buyers to negotiate the details, auctions allow you to set the terms of the contract.
Competitive edge
Buyers may become engrossed in the event's competitive nature and their desire to win may drive up offers. Auctions may be beneficial if your property is in great demand; you may wind up selling your property for more than you anticipated.
Unconditional and efficient sale
When the hammer falls, the buyer is bound to the contract and an immediate exchange takes place with no cooling-off period. It is the most transparent way to sell real estate, allowing both buyers and sellers can see how much the market is willing to pay by seeing first-hand whom they're competing with.
Cons
It can be expensive
Auction campaigns can be expensive as they require an advertising campaign and auctioneer fees. It is important to consider that you, the seller, are responsible for these costs, regardless of if the property sells or not.
High pressure and public
The public nature of an auction may turn off interested buyers, even if they genuinely like your home. Some people simply aren't comfortable with having an auction, with people walking through their doors and having a public sale out front.
It can be hard to bounce back
Auctions can be stressful for everyone involved, and there is no assurance that your auction will be successful. Your bids may not reach the reserve price, forcing you to reconsider. If your home is passed in, you may lose potential purchasers because your price expectations are too high for the market.
Private
Private sales occur when an agent advertises a property for sale with an asking price. It is possible for prospective buyers to submit offers higher, lower, or equal to this amount. After advertising the property, interested buyers submit offers to the realtor, who presents them to the seller, ultimately making the final decision on whether to accept. Private sales may be discreet but time-consuming. The use of private sales is most suitable for properties in low-demand locations where comparable sales data can be used to confirm the vendor's pricing.
Pros
There’s less pressure
When there is no deadline, there is less pressure to accept low offers than there would be at an auction. The people who express interest tend to be genuine buyers, knowing their financial limit, they can commit to their offer.
More flexibility and privacy
Private sales can give you greater flexibility with contract clauses during a negotiation. You also have the ability to extend the time for which your home is for sale if required. Not everyone is comfortable with the environment of auctions, often fast paced, high pressure and very public.
It's cost efficient
The costs of private marketing campaigns tend to be lower than auction campaigns, as long as the campaign doesn’t go for too long.
Cons
Can be a slow process
Selling by private can blow out the length of time it takes to sell your property. Choosing to wait for the right buyer willing to pay the asking price will delay the negotiation process. A ‘cooling off’ period is often included in the contract, giving your buyer the option to change their mind.
It requires flexibility
To accommodate potential buyers, you must be flexible with your schedule. The more restrictive your schedule, the less opportunities you will have to tour visitors around the property. Conducting viewings can be very time consuming and needs to be factored in the planning stage.
There's lack of urgency
Unlike the auction method, purchasers do not compete against each other on a fixed date. The slower pace of the private sale may result in buyers considering other options or waiting for something better, unlike at auctions where buyers are forced to make quick decisions.
Ultimately, if you are unsure whether or not to choose between auction or private sale, it is best to consult with a professional who can give you advice based on your personal circumstances. It is a personal decision that you should feel comfortable making. It’s often difficult to know whether you could get more money for your property by selling it privately or at an auction. The alternative you choose may be determined by your goals and how soon you want to sell, your personality, or the agent's advice. Make sure you understand your financial obligations and communicate freely with your licensed real estate agent about potential risks.