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Should I sell by auction or private treaty?

Should I sell by auction or private treaty?

Which selling method is best for your home? Here are some tips to help you with the decision.

Should you put your property under the hammer or advertise it with a ‘for sale’ price? Both methods have their pros and cons.

Which one is best for you will depend on several factors, including location, property type and the state of the market. We take a closer look at the considerations.

Where do you live?

Auctions are most common in Melbourne and Sydney. In 2014, roughly one in three sales in Australia’s two biggest cities were by auction, according to CoreLogic. This compares with one in five in Canberra, and 10% or fewer in the other capitals, though auctions are becoming more popular everywhere.

If you’re in Melbourne or Sydney, particularly if you’re close to the CBD or have a high-end or unusual property, there’s a good chance your agent may recommend selling by auction.

Auctions are more common in these cities so your potential buyers are more likely to be familiar with the auction process and won’t be put off by it.

Outside Melbourne and Sydney your agent might still recommend an auction, particularly if your property is high end, unusual, and/or has a lot of interested potential buyers.

What about the state of the housing market?

Auction clearance rates give us an idea of the state of the property market. Clearance rates in Melbourne and Sydney throughout May 2015 were at record or near-record levels, according to CoreLogic, reflecting strong property market conditions in those cities.

“Auctions are one of the most timely indicators for sentiment we have in the housing market,” says our economist, Diana Mousina. “They are a good reflection of what is going on.”

This is because auctions are decided by market forces: when demand is high, an auction is more likely to be successful.

You can keep up to date with property market trends through our monthly market roundups.

The power of competition

Auctions usually work best where competition is high. Knowing whether you are in a buyer’s or seller’s market could help you understand the current climate in your area and the level of buyer demand.

Our Home Buyers Index report offers information on whether buyers or sellers have the advantage in property markets across Australia.

The report looks at market performance at a national, state and territory, capital city and city region level.

Benefits of going to auction

If there’s a lot of competition, or even just two committed bidders, at your auction, you may get a higher price than you expected.

Another advantage is that the top bidder at an auction is committed to buying the property. There’s no cooling-off period.

In addition, the seller usually sets the terms of the contract, whereas with private treaty sales there’s more opportunity for buyers to negotiate the details.

Having a fixed auction date for the sale of your home might help if you’re buying a new home and need to coordinate the timing of your sale and purchase.

Benefits of selling by private treaty

If you sell by private treaty, you set the price you want up front. Without a deadline there’s less pressure to accept low offers than there might be at auction.

The costs of private treaty marketing campaigns tend to be lower than auction campaigns, as long as the campaign doesn’t go for too long.

With recent sales and suburb data, our Property Value Guide can help you work out what your property is worth.

Ask your agent

Talk to your agent, or a few agents, for advice on whether selling by auction or private treaty is right for you.

Speak to one of our Home Lending Specialists to discuss your plans for buying or selling.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information.