Understanding the different ways to sell real estate
Thinking about selling your property but confused about the different ways you can sell? Here is a guide to understanding the three main ways you can sell a property in Australia. To find out more detail about these methods and the relevant rules and regulations in your individual state and territory read our specific state information articles here
Selling by Auction
An auction is a private sale held at a specific place, time and date following a marketing campaign over several weeks. A licensed real estate agent will conduct the auction which is governed by strict rules and regulations. These differ in each state and territory so to find out what they are for your area click here
An auction by nature creates urgency as there is a definitive time in which the buyer must act or they risk losing their opportunity to buy the property. Setting an auction date groups all interested buyers together at the one time, creating a competitive environment and the greatest chance to achieve the highest possible price. The theory of an auction is that your home will sell at true market value at that particular time.
Unless the property is passed in and consequently becomes listed ‘for sale’, the seller knows exactly when a sale and settlement will occur. The benefit of this is being able to plan ahead with your next move.
During the marketing campaign, buyers are usually given a price guide which can vary throughout the campaign depending on the amount of interest in your property and feedback received from buyers. The great thing about auctioning your home is that there is no price limit only a minimum amount that you decide you are prepared to sell for, which is called the reserve price.
Setting the reserve should be an analytical decision based on buyer feedback obtained by your agent during the campaign as well as comparable sales in your area. By now you should have a good idea as to how many buyers are genuinely interested and how they feel about your home in relation to the price that has been quoted to them.
The marketing undertaken for an auction property needs to be more focused and can often cost you more. A date is set and you need to create strong buyer interest in a short amount time. Your LJ Hooker agent will recommend using a multi-faceted approach, whereby you advertise across a number of different mediums each week until auction day.
Once the hammer falls, the property is sold and there is generally no cooling off period for the buyer or the seller. Buyers need to conduct building inspections and ensure their finance is approved prior to bidding at the auction. If the property fails to sell at auction, you can continue marketing the property with an asking price. It is likely that one of the buyers, often the highest bidder will come forward and negotiate a sale with the agent on your behalf.
There is another auction term you may also hear - Private auction. These are held behind closed doors and only accessible to registered bidders not the general public. This is often favoured by vendors with very expensive properties who value privacy.
Some of the benefits of selling your property by auction include:
- Auctions attract more buyers to your property because prospective buyers aren’t put off by an asking price.
- The auction date creates a sense of urgency that prevents buyers delaying their decision and lets them know you are serious about selling.
- You are protected by a reserve price. This means your property won’t sell unless bidding reaches a pre-agreed level.
- There is no ceiling price so you have the opportunity to achieve a price above your expectations.
- Auctions produce an unconditional contract for sale with a set settlement date.
Selling by Private Treaty
This is when you, the home owner, set the price tag you want to put on the property for sale. Your LJ Hooker real estate agent will then negotiate with each and every interested party, trying to find a willing buyer who will meet your nominated price or as close to it as possible.
It is important to ask your LJ Hooker agent for guidance with regards to establishing your asking price. They are experts in the local area, they understand demographics, market trends, pricing value and importantly comparable sales in your area. By having a clear understanding of your property's value will ensure you set a realistic price.
In general, sale by private treaty gives the seller greater control over the sale, more time to consider offers by potential purchasers and the ability to extend the time the property is listed on the market (although this often leads to potential purchasers wondering why the property is not selling). Plus potential purchasers must make offers on your property 'blind', this means without knowing what other buyers are willing to pay.
Generally, private treaty sellers can negotiate the price and sale terms with the buyer. Private treaty sales usually have a cooling off period (5 days in NSW, 3 business days in Victoria, 5 days in QLD, 4 business days in NT, 2 business days in SA ), this means that once a price has been agreed between buyer and seller, the sale is still subject to conditions. For example the buyer may have requested a building and pest inspection or may require finance approval.
Some of the benefits of selling your property by private treaty include:
- A fixed price makes it easy for buyers - they don't need to ‘guess’ your desired sale price.
- The price can be adjusted throughout the marketing stage, based on qualified buyer feedback and local market conditions.
- This method of sale is a tried and tested style of marketing.
- It assists buyers to formulate offers that address your desired selling price, which leads to a faster negotiation process.
Sale by Expressions of Interest (EOI)
Sale by Expressions of Interest (EOI) is when you invite buyers to submit an offer to purchase your property by a specified time and date. Each potential purchaser puts forward their best and final offer (in writing).
Generally your property will be on the market for 4-6 weeks to enable you to promote your property effectively and to ensure ample time is given for buyers to look through the home, finalize their finance and determine the price they are willing to pay.
When submitting an expression of interest, you need to include the price you are willing to pay, conditions of sale, such as settlement dates, finance conditions and inclusion and exclusions of the sale.
At the end of the sale period the vendor will review submissions and choose the expression of interest that interests them the most.
If an acceptable offer is not found by the vendor, the property may be placed on the market as a private treaty sale or EOI’s may be called again.*
Make sure - if you are putting in an offer, remember that you may only have one chance to secure the property, so put your best offer forward to ensure you’re not disappointed later on.*
Expressions of Interest provide you with the benefits of a private treaty sale but with the urgency of an auction without the potential stress.
Some of the benefits of selling your property by Expressions of Interest or Tender include:
- This method of sale shows you are confident about your property and a successful sale.
- Tenders offer the intensity of an auction but without the potential stress of an auction day.
- Tender enables you to keep the price you may accept for your property discreet and lets the market dictate the price buyers are prepared to pay.
- A tender has a closing date to create a sense of urgency in the buying process.
- This method of sale generates competition for your property.
It is important you talk to your LJ Hooker Real Estate agent as to which method they believe is right for you and your property in order for you to achieve the highest sales price. Certain areas and certain properties within an area will achieve better results when sold via private treaty vs auction and vice versa. So make sure you do your research and talk to your agent about the best method of sale for your property.