To Auction or Not to Auction?

That is the question many are asking.

Selling by private treaty or auction is a highly debated topic both within the real estate industry and when sitting in front of sellers. Many argue that auctions are the best way to secure the highest sale price due to the competitive nature, others believe private treaty is the way to go. Truth is, both have their pros and cons and it’s a decision that should be made from home to home – there is no one size fits all answer. With that said, I’ve tried to list the pros and cons of each as seen from an agent's perspective.

The Pros.

The contract
Should you either buy or sell at auction, you know exactly what your terms are. It’s a very simple contract that has the finance and building and pest clauses removed giving you absolute security in the knowledge that your knockdown figure is the sale price.

The time frame
Auctions put a perceived deadline on the sale of the home. Yes, some are passed in and some sell prior, however buyers understand that if a home is going to auction, the seller is genuine and they are best to view the home quickly so they don’t miss out. The process does generate a sense of urgency amongst buyers and this compels buyers to make a decision.

The competition
At an auction, competitive bidding amongst buyers ensures the best possible result.

The protection
An auction provides sellers with protection in the form of a reserve price. This means that the home will not sell unless bidding reaches a pre-agreed level. Further, there is no ceiling price, so you have the opportunity to achieve a price above expectations, especially if there is a competitve crowd.

The Cons

The cost
This isn’t actually a con but we get asked about it all the time so I thought I had better mention it. The only difference between an Auction campaign and a private treaty campaign is the cost of the Auctioneer. But a good one is worth their weight in gold so don’t skimp on this.

The stress
Again, this isn’t a con however there is a perception out there that auctions are stressful. Truth is this couldn’t be further from the truth. A good agent keeps buyers and sellers fully informed throughout the entire process. Yes, there’s an uncomfortable feeling on the day of the auction however that pales in comparison to the stress of waiting for a conditional contract to go unconditional, that can take weeks (or in some cases months).

The contract
Hang on a minute, isn’t the contract a pro? Yes, it is. However due to the unconditional nature of the contract, it is up to the buyers to be fully prepared come auction day and some buyers are simply not able to purchase without a ‘subject to finance’ clause.