Hero Image

Methods of Sale

What is your best option when selling

Auction

Overview of the Auction Method:

The very best means of achieving a premium or fair market value for a property within a specified time is Auction. The deadline for the sale creates a sense of urgency among buyers and sales consultants alike.

The word 'auction' derives from the Latin word 'augere' which means 'to increase'. Dating back to Roman times, auction is one of the oldest methods of selling and yet today is the most advanced method of marketing real estate.

Auction involves a short, sharp and intensive marketing campaign of a property without a price. This is to test the market to see what buyers, in a competitive situation, are prepared to pay to become the new owners of that property. Marketing with a price limits what a keen buyer may pay. Once a listing price has been established for a property, a ceiling has been placed on what a buyer expects to pay for it. Auction, on the other hand, offers a real opportunity to get more for a property than the seller might expect.

Our objective is for the seller to have the highest price possible offered for their property by the end of the auction campaign.

A well-run auction programme may take more time and effort for the consultant but will ensure that the property gets the maximum exposure. It is certainly the method that offers the highest degree of responsibility and control shared between the consultant and seller.

Through auction, buyers are prompted to pay their top price by:

* the deadline

* confirmation of value and desirability by other buyers/bidders

* fear of loss to a stronger or keener buyer/bidder.

The three stages to auction

There are three opportunities to sell a property using the auction method.

STAGE 1 In the lead-up period high profile auction marketing will highlight the property, producing the greatest exposure during the period when enquiries are likely to be at the highest level.

STAGE 2 The auction itself is the shortest part of the process but it is the best opportunity to sell during competitive bidding in an open arena.

STAGE 3 Post-auction period - some people believe that if the property does not sell on the auction day then the auction system has failed. This is not true. Stage three provides opportunity to negotiate with those who may need to sell another property or arrange finance before they can commit themselves unconditionally.

The benefits of auction

Benefits to the seller

• The seller sets the terms, conditions and deadline.

• This auction-oriented target marketing puts the `spotlight' on the property, adding a competitive edge that strongly favours the seller.

• The property is neither overpriced nor undersold; its value is determined by the market and individual buyers.

• The `no price' aspect will attract more genuinely interested, cash-in-the-hand buyers.

• It allows sellers to plan ahead in the knowledge that a specific date has been set for the sale of their home.

• A cash buyer means the seller can proceed immediately with their goals.

• A sense of urgency is created by the set timeframe, bringing interested buyers to a point of decision.

• The level of market interest will help the seller gauge the reserve price, with the real possibility of achieving a premium price.

• The seller has the option and may decide to accept a cash offer prior to auction day.

• Those who attend the auction will be focused on establishing the maximum price they will pay, not how little the offer should be.

• The seller controls the terms of transaction and actively participates in the sale process.

• A successful purchase requires a payment of a deposit on the day, equal to 10% of the purchase price.

• If the property is passed in, it will be exposed on the open market as an exclusive listing at a saleable price established from the market feedback received throughout the auction process.

• On top of all of this, the level of service and feedback by their agent is second to none.

Benefits of auction to buyers

Buying at auction avoids the traditional offer / counter offer negotiation process. Everything is out in the open. If successful, the buyer will have the satisfaction of knowing they have purchased at `true market value.' In addition:

• A set auction date allows the buyer to better plan and arrange finance, sell their existing property, organise a property check, familiarise themselves with all the auction documents and consult their solicitor.

• They can submit an offer for consideration prior to auction. All pre-auction offers must be cash unconditional.

• If the property is passed in, their sales consultant can help them enter into negotiations.

Tender

The tender works in a similar way to the auction system, except there is no public auction day. Instead, tenders or offers close at a specific time on a specific date.

Tender presents another opportunity for sellers to create a competitive situation without stating a listed price. They set the terms, conditions and the deadline, and prospective buyers have only one opportunity to put forward their most competitive offer.

Like auction, tender increases the number of enquiries, inspections and opportunities to obtain the very best price for the property. Also, the seller doesn't necessarily have to accept the highest price. They can choose to negotiate with any of the tenderers to achieve a satisfactory conclusion.

The tender process

1. When sellers offer their property for sale by tender, everyone with an interest to purchase must put in their offer on a normal Sale & Purchase Agreement/Contract or a specially prepared tender document.

2. These offers are sealed in an envelope and deposited in a tender box, by a predetermined date and time.

3. All tenders are held by the consultant or someone appointed by the seller until the close-off date.

4. They are then opened together, allowing the seller to choose the most favourable offer. A time frame is often given for those offers to be considered.

The benefits of tender Benefits to the seller

• All offers and negotiations are confidential.

• The seller sets the terms, conditions and deadline.

• The tender-oriented target marketing draws attention to the property, adding a competitive edge that strongly favours the seller.

• You do not overprice or undersell the property; instead you let the market and individual buyers determine the value.

• The `no price' aspect will attract more genuinely interested buyers.

• In the case of an open tender the seller may decide to accept a cash offer prior to the tender date.

• If the property is not sold by the tender date, it will be exposed on the open market.

• A high level of service and feedback by their agent. Benefits to the buyers

• A set tender date allows the buyer to better plan and arrange finance, sell their existing property, organise a property check, familiarise themselves with all the tender documents and consult their solicitor.

• They can submit an offer for consideration prior to the tender date.

• If the property is not sold on the tender date, their sales consultant can help them enter into negotiations.

Offers do not have to be cash; they can have conditions of sale attached.

Price By Negotiation (PBN)

This method of sale can be applied in any of these three ways:

1. No price is advertised, like an auction, but without an auction plan. Buyers make offers through the sales consultant, as in exclusive agencies.

2. A minimum price may be advertised. Offers above this minimum price are considered by the seller. A price range may be advertised e.g. $170,000 -$195,000. Offers within this price band are considered by the seller.

Benefits to the seller

• If they choose, a high profile marketing programme puts the `spotlight' on the property adding a competitive edge that strongly favours the seller.

• You do not overprice or undersell the property; instead you let the market and individual buyers determine the value.

• The `no price' aspect will attract more genuinely interested, cash-in-the-hand buyers.

• The level of market interest will help the seller gauge a fair sale price, with the real possibility of achieving a premium price.

• Flexibility in marketing - e.g. the seller may start off with no price like an auction, gather market information and feedback, and if the property is not sold within the first two to three weeks put a minimum price range or a fixed price on it, or convert to an auction.

Disadvantages to the seller

• Unlike auction and tender there is no sale date or deadline in place so there is no urgency placed on buyers to make a buying decision.

Benefits to the buyers

• As their Harcourts sales consultant you can help them get a good feel for the local market before they put an offer in, and educate them through the 'buyer's interview'.

• They can submit an offer for consideration at any time, and it does not always have to be cash.

• A price range may make it easier for buyers to determine if the property is within reach.

Fixed Price

What is it? This means that a property is listed with a definite price.

Advantages to the seller

• If they choose, a high profile marketing programme puts the `spotlight' on the property adding a competitive edge that strongly favours the seller.

• If the property is priced correctly it will attract a lot of interest, and in some cases have multiple offers resulting in a premium sale price. The fixed price may make it easier for buyers to determine if the property is within reach. The fixed price gives the buyer a price guideline and allows for a property search by price on real estate websites. Disadvantages to the seller

• It is easier to over or under price the property.

• Buyers may discount the property without inspecting it, by judging it solely on the price. This can effectively limit the market for that property.

• The property becomes comparable price-for-price, feature-to-feature with all other similar properties, normally resulting in the seller experiencing a downward pressure on the price. Benefits to the buyers

• The fixed price will make it easier for buyers to determine if the property is within reach.

• They can submit an offer for consideration at any time and it does not always have to be cash.

• As the listing Harcourts consultant, you can educate the buyers at a 'buyer's interview'.

Private Sales

Why owners sale privately In a private sale, there is no listing authority given to any company. Owners instead try to sell their property themselves. There are several reasons why owners choose to sell privately.

• They don't like the idea of paying an agency commission/fee.

• They feel they can do a better job than some of the real estate people they've met.

• They feel the property is worth more than professional advisers have told them.

• They feel they may have a buyer. They’ve had a bad experience with previous sales.

The disadvantages of selling privately

In addition to being an uncontrolled method of selling, private sales have the following disadvantages.

• Buyers automatically expect a reduced purchase price because the seller is not paying any real estate fees.

• Pricing is critical - often private sellers over or under price.

• Buyers who view the property don't usually give private sellers honest feedback on the house or the price.

• Private sellers can't follow up with buyers without looking desperate - this is a function consultants can do well.

• Security problems. The private seller may be putting their family at risk by encouraging strangers to visit the property at any time.

• No Bluebook advertising or listing card with photo, no agency internet advertising.

• No one sales consultant to commit to the process and provide priority service.

• Usually a lack of dedicated marketing funds. • Both seller and buyer are trying to save the commission.

• Advertising costs are higher for a private individual compared to the discounted rate that a real estate agency receives.

Benefits to the buyers

• The only benefit to the buyer is relying on the seller's lack of market knowledge and negotiation skills to get the property at below market value.

We'll help you choose the method of sale that's right for you.

1. Sale by Auction

Auctions are an effective way of creating a sense of urgency and a call to actions amongst buyers, because an auction date forces the buyer to make a decision.

* Competitive bidding can push up the price because the sale price is determined by what the market is prepared to pay.

* Your property will be sold without conditions set by the purchaser. As the vendor, you set the terms of the sale.

* Remember, you can always sell prior to auction if the price you've settled on is met.

2. Sale by private treaty

When you sell by private treaty, the timing of the sale is open and as the vendor, you set the sale price.

* This gives you greater privacy throughout the sale process

* Marketing costs are tailored to suit you and you are not locked into a predetermined date of sale

3. Sale by tender or expressions of interest

As the vendor, you set the date and time for all tenders to be submitted - by setting this deadline, you force a decision.

* With only one closed bid permitted per buyer, you encourage higher offers

* Discretion and confidentiality are maintained because you decide with offer to accept, while avoiding the emotion generated at an auction.