Auction vs. private sale - which is better?
One of the most commonly asked questions amongst home sellers is what is the better option between holding an auction or settling through a private sale?
Understanding the difference between the two options and knowing the benefits and disadvantages towards both approaches can be helpful in deciding which method is better for you.
Auctions - are they the best way to sell a home?
One of the most common methods of selling properties, auctions are often the go-to option for most sellers.
The process of completing an auction commonly involves these several steps:
- Pricing: This is essentially a discussion with your real estate agent in order to set a minimum selling price, known as the reserve price, for your property.
- Date: You and your agent will then decide on a specific date for you to sell your property. It is advisable to think carefully about when you decide to auction your property as it can ultimately be an influential factor in the overall selling bid.
- Sell: This is the point where your property is put out to buyers and price bids are mediated through an auctioneer. The auctioneer often starts the auction with an opening bid (often a price smaller than your reserve price) to begin the process.
From there, buyers bid against each other until only the highest bid is remaining, in which case the property is then sold for the highest bid.
Alternatively, when bids do not reach above your reserve price, your agent will normally negotiate with the highest bidder and then return you to discuss your options from there.
Want more information on how to set reserve price? Check out our article here.
Why sell your home via auction?
The popularity of auctions is primarily due to the various advantages which come hand-in-hand with auctions. Particularly, the economical process of auctions are generally thought to be the best way to get the most competitive price for your property, as buyers are bidding against each other for the property.
As well as this, sellers are able to set the grounds of the auction and dictate their own selling terms. Furthermore, the entire process is fairly speedy, with settlements often in place within the month.
The cons of selling a home via auction
However, there are a few limitations surrounding auctions, this can encompass the general perspective surrounding the atmosphere of auctions which can be off-putting to certain buyers. Know that for older buyers, the prospect of having to fight for a property can appear to be an exhausting experience for them.
Ensure you know your market so you can determine whether auctions are the right way to sell your property. Additionally, the bidding process has legal constrictions, for example, once a property has been settled upon with a bidder, even if you are offered a higher price later by another bidder, you must sell your property to the contracted bidder.
An important point to note is that whilst auctions are generally a straightforward process, there are various strict laws concerning auctions, so ensure you consult your real estate agent about this.
Selling a home via private sale - how does it work?
Also referred to as an ‘asking price’, this process is a means to hold a less hostile environment set for buyers to purchase properties. This process, as the name suggests, is done less publicly and is often solely conducted by the seller.
Private sales often take place when a seller is approached by a buyer to purchase the property and negotiations and contracts are all negotiated through this. Otherwise, if not approached by any buyers, sellers can opt to send out offers or expressions of interest to potential buyers to sell their property.
From there, once an interested buyer and price negotiations have been settled upon, a contract is written and signed.
The benefits of private sales
There are various benefits involved with private sales, particularly, the approach can appeal more so towards certain buyers due to the more individual and personal method of selling. As well as this, for sellers who wish to review their options at a time suitable to them.
This slower method can allow for sellers to consider their options carefully before agreeing to sign the contract. Make sure you ask a professional agent to help you to mediate through negotiations as buyers can attempt to pressure you into a price below your property’s value.
The cons of private sales
As with all the selling options, there are a few disadvantages with private sales which should be considered. Particularly, this approach can result in less competition and urgency to drive up the price of the property and can potentially result in a smaller price as opposed to an auction.
Whilst most home sellers usually opt to auction their house, it is important to understand the benefits and limitations of all your potential selling options as well as market in order to decide. In any case, it is wise to ask a real estate agent about your selling choices to make sure you choose the most suitable option for you and your property.