top of page

Deciding The Method of Sale for Your Property: Private Treaty vs Auction Which One?

There are two basic sales methods for selling residential property in Australia: private treaty and auction. There is no correct answer as to which of them works best. The right choice depends upon your prior selling experience, your property type and the market condition. A real estate agent who claims to the contrary or bias toward one method of selling as the best and the only option might misguide the home seller. This article will provide you with an understanding of both methods and hopefully help you decide on which method to use, depending on your situation.

Auctioneer and crowds of buyers at Ray White Auction
Auctioneer and crowds of buyers at Ray White Auction

Private Treaty - Selling Method

When you sell your home by private treaty, you set a price, and the property is listed for sale at that price.

Property Type:

This method will be suitable for property types with enough recently sold data to determine its correct price easily. That data will be on recent comparable sales of similar property in the neighbourhood. This type of method will also suit properties that have little prospect of competitive bidding.

Market Condition:

Private treaty should be used in a poor market where buyers are few, and their sentiment to the property market is negative.

Benefits for the seller:

Buyer perception: Private treaty has better market acceptance compared with an auction. Every buyer likes the certainty aspect of knowing the asking price rather than second guess it. It is also a favourite among the buyer due to having a cooling-off period after the exchange.

Control: Seller has greater control over the whole selling process, especially with the asking price (mind you asking price is different from the final selling price). The buyer also has a cooling-off period to withdraw from the sale after their due diligence.

Risks for the seller:

Asking Price: Unfortunately, the benefits can also be the weakness. By setting the price, the seller is at risk if the asking price is not set correctly. It is essential to work with a real estate agent with experience and local knowledge to provide you with concrete proof and research of the best asking price for your property. If you ask too high of an asking price, you risk scaring the buyer to inspect. Too low of an asking price you risk of underselling the house. If you received an offer, there is also uncertainty in not knowing whether you have found the best buyer or wait for the next buyer to come along. The only sure remedy is to have done your research and be sure of the pricing.

Cooling off period: Another risk for the seller is that buyer has a cooling-off period. If the buyer withdraws from the sale, it disadvantages the seller by not introducing the property to different buyers during the cooling-off period, which extends the property time on the market.

Auction - Selling Method

To sell your property through an auction process, the amount you want for the property is generally not revealed to potential buyers who are encouraged to attend the auction and bid against other potential buyers.

Property Type:

Auction is best suited to property that is high on demand as auction success rely on the competition.

Market Condition:

Auction is best used in a strong market, especially when prices rise and buyers are plentiful with positive market sentiment.

Benefit for the seller:

Price: The obvious benefit of an auction comes in a competitive bidding situation where buyer emotion can drive the price up far beyond expectations.

No cooling-off period: Auction provides an advantage for the seller as the successful bidder has no cooling-off period.

Risk for the seller:

Buyer perception: Buyer acceptance of auctions as a selling method is lower than a private treaty. Due to the auction having no certainty of knowing the asking price and not having a cooling-off period, some buyers dislike the auction process and avoid property selling through this method.

Control: Seller has minimal control over the whole selling process. The seller's only authority is by controlling the price through reserve price, which will be the lowest amount you are willing to accept for your property at the auction. The seller will rely entirely on the agent's skill to make a successful auction campaign. The buyer also has minimal control as there is no cooling-off period for anyone who buys property at auction. The successful bidder must sign the sale contract and pay the seller a deposit on the spot (usually 10 per cent). The buyer's due diligence happened before the auction.

Passed-in: The property will be' passed in' if the highest bid at the auction day is below the reserve price. There can be a stigma associated with property that does not sell at auction as perceived failure and becomes undesirable in the buyer's eye.

The more significant problem is that the auction campaign relies entirely on the agent. If the auction campaign has been handled badly by inexperience agents

To assist you decide which method of selling is the best in your situation, contact Irving 0468 956 677.


bottom of page