Auction vs Private Treaty/Sale: which one should you choose?

The Australian real estate market is shifting dramatically, with results across the country remaining steady at best.

Selling by auction or private treaty/sale is always a hot topic with both agents and the general public; however, with falling auction clearance rates and a decreasing number of buyers, the selling method debate has become front and centre.

So, which method is better – Auction or Private Sale?

In a cooling market, opinions may start to change between agents, buyers and sellers, so it’s a good time to discuss the pros and cons of both.

Selling at Auction

Benefits

1. Sense of urgency

With an end date and a final result to be determined then and there, live, and amongst other buyers, it compels them to make a decision or risk losing out.

2. Stronger competition

The live bidding process, together with a fast-speaking auctioneer, induces competition to raise the price until a winner is decided.

3. Reserve price

The property won’t sell unless the pre-approved reserve price has been reached.

4. No ceiling price

With bids going upwards, there is no restriction on how high they can go. Bidding will only conclude when one buyer remains without a challenger.

5. Set terms

The seller can set the conditions before buyers sign up so that the sale is agreed to on their terms, such as an unconditional sale with no cooling off period.

Limitations

1. Restricting buyers

Some buyers may find auctions intimidating, unable to be there on the day, or that they cannot meet the seller’s set terms, meaning that the number of buyers could be decreased, which lowers competition.

2. Uncertainty

In a declining market, more properties are passed in and clearance rates are reducing. Agents and sellers don’t know if they’re going to get any bids on the day, because the agent may have overquoted on price, or the reserve price may be set too high.

3. Early offers

If you receive early offers, there is no transparency for other buyers to compete. If it is an acceptable price, a cooling off period may apply.

Private Treaty/Sale

Benefits

1. Less pressure

A private treaty/sale often allows buyers to feel like they can take their time in a drawn-out negotiation. These types of buyers hate the scrutiny of a public auction and so are attracted to private treaty/sales

2. More flexibility

More buyers can participate than in an auction, because buyers can have flexible terms.

Limitations

1. Cooling off period

Private treaty/sales tend to be subject to a cooling off period, which means the sale could fall through if the buyer decides, even after the contract has been signed.

2. Length of sale

Without a sale date and no sense of urgency, the sale can stretch on without a deadline and potentially become stale.

3. Ceiling on price

If a price guide is provided, buyers are reluctant to pay more than the top end of the range.

4. Transparency

There is a lack of transparency in private treaty/sales because the agent can’t share the other offer prices with all buyers, meaning the buyers are reluctant to believe the agent and less likely to compete.

However, what if there was a better, third way?

With auctions and private treaty/sale being so opposite, what if there was a middle ground that took the best features of each to form a more effective way to buy and sell property?

One that would meet the needs of all parties involved in the transaction?

There is, and it’s called Openn.

Openn combines the best characteristics of both auctions and private treaty/ sales and removes their limitations.

It welcomes all buyers to be involved by offering flexible terms and then provides them all with transparency of both price and the number of other contracted buyers over a set time period. This creates an optimal environment for healthy competition which naturally drives the price to the maximum it can be.

What is Openn?

Openn is an online property purchasing platform designed to be transparent and fair for both buyers and sellers. Managed by professional real estate agents, it allows qualified buyers to openly negotiate on price with the advantage of knowing exactly how many real competing buyers there are.

To find out more, visit our website at www.openn.com.au

Or sign up for Openn today and become an observer to see the process in action for yourself.