Property owners in Australia have two avenues open to them when they decide to sell: a private treaty sale and sale by auction. Auctions are popular amongst owners of properties in sought-after areas; the ability to drive a sale price up through fierce competition between buyers is often too tempting to resist. Auctions are also particularly popular with owners who live busy lives and want a more structured and scheduled selling experience. However, selling a property via an auction in Australia is very different from the private treaty route, and careful planning and preparation are required in order to achieve a satisfactory sale.
Marketing your property before auction
Marketing a property in readiness for an auction should commence around six weeks before the event. A real estate agent should utilise a range of marketing opportunities to create a real ‘buzz’ around the property. Possible outlets could include:
- Property websites
- Local newspapers
- Real estate magazines
- Flyer drops in the local area
- Personal invitations
- Social media
- Community notice boards
As part of the marketing process, vendors will need to make their home available for viewing. This can be done on an individual basis or through a series of ‘open home’ events on convenient dates. In order to generate a healthy level of interest in a property, vendors should schedule events in the evenings and on weekends wherever possible.
A real estate agent will usually take charge of communication with interested parties, and this may result in an offer being received before the auction date. If the vendor accepts an offer, it is possible to arrange a sale in line with private treaty arrangements. If no offer is accepted before the auction, the process will continue as planned. A good real estate agent will keep all interested parties abreast of developments until the day of auction – a good way of maintaining their interest in a property.
Auctions in Australia are conducted on an unconditional basis. This means that the sale of property on auction day is not reliant on arrangement of finance, searches, legal checks and conveyancer’s reports. Buyers are expected to conduct their affairs prior to the auction date. And once a winning bid has been confirmed, the sale is legally binding.
This is different than private treaty offers where there is usually a cooling off period before the sale is unconditional.
A copy of the proposed contract should be displayed in the auction house before and during the bidding – something a real estate agent should deal with. This contract will detail and caveats and encumbrances that apply to the transaction.
Buyers will need to complete a formal registration process before being given the opportunity to bid, which will include the provision of an official form ID. Registered bidders will then be given a numbered paddle, which they must raise in the air to signify a bid.
When auction day arrives, the vendor and the agent should have set a reserve price that best reflects the property’s potential – without deterring interest in it. This price will be communicated to the auctioneer only a few minutes before bidding starts, and it will remain completely confidential. A sale will only complete if a bid matches or exceeds the reserve price – an event that is often announced by the auctioneer with the words: “the property is now on the market.”
The bidding may temporarily cease occasionally to allow negotiation between the vendor and buyers, but bidding will commence once discussions have ceased. Once a successful bid has been lodged and the auction has been formally declared as over, the buyer will need to pay the required deposit immediately – normally 10% of the final sale price. At this point, there is no cooling-off period. Bids are unconditional, and any winning bid is legally binding.
On occasions when the winning bid has not met the reserve price, the buyer has the option of walking away or negotiating with bidders on an individual basis; this is something a real estate agent will take charge of on behalf of the vendor.
What are the advantages of selling by auction?
- Sellers don’t have to worry about withdrawals, renegotiation and delays – winning bids are made on an unconditional basis
- The public nature of an auction ensures the best possible price is achieved in many cases
- An auction works on a predetermined schedule, which provides a level of certainty and order to the vendor
- The competitive nature of auctions drives price upwards – particularly in highly sought-after areas
- Properties which are difficult to value due to their unusual features can benefit from auctions, as there is no better way to determine the true value of a property at any given time
Auctions deliver certainty for the vendor and competition between buyers, but they are legal processes that require skill and experience to navigate – attributes demonstrated by an accomplished real estate agent with local knowledge. Make sure you do your research and find a real estate agent who can get the best outcome in the sale of your property at auction.