Ang Kalatas Volume IV February 2014 Issue | Page 17

Volume 4 | Number 5
February 2014
www.kalatas.com.au

17

PROPERTY MARKET

Selling by Auction or Private Treaty? Rising trend
in building
EXPERT
ADVISE
Real Estate
Made Easy
DOM
MELLA
Dom Mella is
the Principal/
Licensee of Ray
White Rooty
Hill. He’s also
a qualified
accountant with
background
in Finance &
Investments.
He’s been in real
estate business
since 1999.

I

am often asked which
is the better method of
sale for their property,
whether by Auction or
by Private Treaty? There’s no easy or simple answer to
this question. It is usually a case
to case basis. Several factors have to be considered first before I
usually give an advice to a seller.
Selling by private treaty or
auction is a highly debatable
topic in the industry.  Whilst
many would argue that Auctions are the best way to secure
the highest sale price for your
property, others believe Private
Treaties are the way to go.
Let’s examine the benefits &
limitations of each method.
llAUCTION
lBenefits:
1)  Sense of Urgency- Auctions generate a sense of urgency amongst buyers.  This sense
of urgency is due to there being
a set ‘end date’ for the sale of the
property and this compels potential buyers to make a decision
on the day.
2)  Competition Amongst
Buyers- At an Auction, competitive bidding amongst potential
buyers means that the selling
price often exceeds the expected
value of the property, maximis-

ing the sale price for the seller.
3)  Reser ve Price Protection-  An Auction provides sellers with protection in the form
of a reserve price.  This means
that your property will not sell
unless bidding reaches a preagreed level (reserve price). 
Further, there is no ceiling price,
so you have the opportunity to
achieve a price well above your
expectations especially if there
is a competitive crowd.
4)  Set Terms-  Auctions are
suited to situations where the
owner wants an unconditional
sale (no cooling-off at auction)
or wishes to set specific terms of
sale, such as settlement terms to
suit the vendor.
lLimitations:
1)  Cost - There may be additional costs involved to sell a
property via auction to cover
the cost of hiring an auctioneer,
special or extensive advertising/
promotion, venue, etc.
2)    Sales Evidence-  For
properties where there is ample accurate sales evidence, an
auction may not be the best way
of selling.  For example, for a
large block of identical units of
similar specification, everyone
would be aware of the sale price
of other units, thus private sale

may result in a higher sale price
per property.
3)  Special Conditions of
Sale - Generally, auctions are
not suited to buyers who wish
to purchase subject to finance
as often bids are unconditional. 
This limits the potential number of buyers to your property.
llPRIVATE TREATY
lBenefits:
1)  Less intimidating for
buyer-  For many potential sellers and buyers, the thought of
an auction can be quite overwhelming and intimidating. 
For this reason, Private Treaties
can be beneficial in that sellers
have more time to consider offers made by potential buyers
and vice versa.
2)  No urgency to sell-  Private Treaties are suited to sellers that do not have an urgency
to sell, and where they may be
open to accepting different sale
terms, such as an extended settlement period, sale subject to finance or subject to the sale of the
buyer’s home.
3)  Cost- Selling via private treaty can often prove to be
less expensive than an auction,
as marketing campaigns for private sale properties are usually
not as extensive.

4)  Privacy- Private Treaty occurs through a negotiation
process, it provides greater privacy and enables you to keep the
specific details of the sale out of
the public eye.
lLimitations:
1)  Cooling off period- Private Treaties are usually subject
to a cooling off period (this period differs by st