Selling your home usually occurs by private treaty, auction, expressions of interest or price on application. Each method has its merits.
Deciding to sell your home is just the beginning. There are so many other decisions to be made in order to help the process go as smoothly and as profitably as possible.
The situation more than justifies the time spent making the right decision – for most people, buying and selling a home is the most expensive purchase and sale they will ever make. It’s worth doing right.
There are many ways to sell your home, and all have positive and negative considerations. Here are some of the ways you might be able to sell your property, and the reasons each one may or may not be right for you.
Private Treaty - Normal Sale
The most common way to sell a house is by listing the property along with a suggested sale price. Buyers can then negotiate with the real estate agent to get the price as low as possible. Sellers might choose to stay firm on their suggested sale price, or negotiate downwards until both parties are satisfied.
Some agents choose to list the price as an ONO – “or nearest offer”, meaning the price is at least somewhat negotiable. Regulatory authorities frown on this type of marketing coining it ‘bait’ marketing.
Private treaty upside
Sometimes, multiple buyers compete for a desirable property, allowing the agent to increase the asking price. Selling a listing is generally less expensive, with the campaign size reduced when compared to an auction.
Sales in this style are familiar for buyers, with a lot of room for negotiation. They are well suited to sellers who aren’t limited to a small time window for selling, allowing them to hold off for someone willing to meet their price.
The price is upfront, so people who are viewing the property are more likely to be potential buyers as they already know the asking price and are still willing to pursue the sale.
Private treaty downside
These types of sales put your cards on the table – it’s unlikely you’ll get more than you ask for, you will potentially ostracise buyers if you ask for too much (expecting to get negotiated downwards), and they can take a long time.
There can be an element of uncertainty – contracts can take time to go unconditional, properties don’t always sell in the expected time frame, and prices are often negotiated over time.
If you aren’t in a hurry to sell and are happy to negotiate, the standard selling method should be less expensive and get you the right results.
An auction is a specific time and place where multiple potential buyers gather to offer bids for a property. The atmosphere can create competition among buyers, sometimes driving up prices.
While the seller may have a reserve price (the lowest they are willing to go), it isn’t disclosed to the buyers, so the seller might end up with a higher sale price than they would have listed for.
Auctions also create certainty around the day the property will be offered for sale. Unlike standard listings, potential buyers need to commit to attending an auction and putting in their bid on the day. Auctions can attract more potential buyers and limit the amount of time the property spends on the market, which lowers overall costs.
An auction creates transparency. It’s easy to gauge how many people are interested, how much they are willing to spend, and buyers can see who they are competing against which can drive up competition. Once the auction is concluded, the buyer is bound to an unconditional contract, removing uncertainty from the process.
However, auctions can cost more, requiring a higher upfront payment. Choosing an auction format often excludes people who want to put an offer on a house “subject to finance”, as the contracts are most often unconditional. An auction is great for properties that have a lot of interest, but will be too daunting for some buyers, lowering the potential pool of interest.
Expressions of Interest/Tender
Instead of seeking out buyers, you can get them to come to you. Expression of Interest or EOI sales typically advertise the house for 4-6 weeks, and then invite potential buyers to submit EOI forms.
Expression of interest upside
The expressions of interest will close at a specified time, and interested parties will need to have submitted their best and final offer before that point. That offer will include the price the buyer is willing to pay, along with conditions of sale.
The seller will then consider the offers.
Expression of interest downside
If none are deemed acceptable, the property could be relisted as a private sale, or another EOI opened. It’s a great way to test the market, and see if there are any offers that can be accepted
straight up. EOI is often used for houses in high demand, such as mansions or desirable inner-city properties.
However, if no acceptable offers come in, the process is a waste of time and money spent on advertising costs and agent fees during that time period. If your property is desirable enough that buyers are likely to seek it out and make an offer, then an EOI will get you an idea of the interest in your property at the least, and an acceptable offer at best. However, for most sales, an EOI isn’t worth the time.
Price on Application
Similar to a normal sale, POA sales ask the potential buyer to contact the agent for pricing.
Price on application upside
The strategy ensures that anyone going through the property has a genuine interest in purchasing it, as they have had to track down the details. Without the purchase price listed, the buyer will need to enter into negotiations on the agent’s terms. There’s always the chance that the buyer might offer a higher price than the seller would have listed the property for.
Price on application downside
However, unless the house is particularly desirable, adding POA makes it difficult for buyers to know if the property is in their price range and it makes online searches more difficult.
The agent will have to field calls from people wildly undervaluing the property, who wouldn’t have enquired if the price was listed.
Many potential buyers are annoyed by a POA designation, and will pass over the property rather than risk going to the effort of contacting the agent, only to find out it was out of reach.
Conclusion - Choosing How to Sell
As always, the way you sell your property will be largely dependent on the type of property, your ideal timeframe for selling, the amount of potential interest, and how your agent chooses to operate. You might need to weigh costs – some methods might cost more, but ultimately result in a higher sale price.
There are pros and cons to each method of selling, and a good agent should be able to help advise you on what method will work best for your property, and why. There are many decisions when it comes to buying and selling a house, but choosing the right method creates the right conditions for the best possible sale price for your property.