Published on December 11th, 2017
Auction or best offer by?For sellers, getting the best price for their property is always top of mind. One of the first choices you’ll be asked to make after you’ve consulted with a real estate agent is whether you want to sell via auction or invite offers. Your real estate agent will be able to help you make the decision based on their knowledge of the local market and their assessment of your property, but the ultimate decision comes down to you.
Here are the pros and cons of each option:
Seller certaintyThere is no cooling off period applicable in an auction situation. The successful bidder must sign a contract in order to formalise their bid, and the seller also signs the contract meaning that the buyer is fully committed from that moment.
The successful bidder is also not able to add further conditions to the contract once they have won the bid. That gives the seller greater certainty that the purchase will settle, as well as control over the conditions under which they’re willing to sell. If you want a quick settlement, an auction may be the solution.
Price safeguardsThe seller via the auctioneer sets a reserve price. If bidding does not reach that reserve, the home is ‘passed in’ and the seller is not obligated to accept a lower bid. That means that the seller is not at risk of having to sell their home for a price under that which they think they can receive.
Legislation allows the seller to make their own bid if they wish to push up the bidding, but only if the auctioneer announces the bid as such. ‘Dummy bids’, which are non-genuine bids used to push up the price, are illegal and attract penalties. These restrictions protect the buyer from bidding more than they have to, to win the property.
Emotional impactBy selling your property at auction, you could also benefit from a literal bidding war. Registered bidders who have an emotional attachment to your property may feel compelled to bid higher than they planned, due to seeing their competition right in front of them. It can be easy to convince yourself that it’s only a couple of extra thousand dollars as the bidding creeps up by increments if you really want the place. Good for the seller, not always good if you’re the buyer and get carried away.
‘Best offer by’The other common method of selling a home is by best offer. A vendor will decide upon an asking price, or at least a minimum price guide, usually with the assistance of their selling agent.
UrgencyBy advertising a date by which offers are due, the real estate agent is creating a timeframe for the campaign. This communicates a sense of urgency to the sales process and encourages would-be buyers to make an offer. Compared to an auction, where the buyers can see how many other people have turned up and are actively bidding, a best-offer situation is fairly opaque. An interested buyer may increase their offer against the chance that someone else is out there poised to sign a contract as well.
NegotiationSelling by best offer allows the parties to negotiate back and forth until an agreement has been met. Negotiations may centre on price, but also focus on the size of the deposit, the length of the settlement period or other conditions.
That allows everyone to feel as if they’ve got the best deal, and it also increase the chances of the property selling. As the seller, you may have to compromise a little, but if you want the sale that might be a better option than the all-or-nothing approach that an auction can imply.
Which one is right for you will depend on the nature of the property and the state of the market, but also your personal preferences. Chat to your real estate agent and ask any questions you need before making you mind up, and they’ll be able to steer you correctly.