Is it better to sell by Auction or Private Treaty?

Is it better to sell by Auction or Private Treaty?

14 Jan 2019

This is the third most commonly asked question for agents. Ironically we feel it takes first place in the most poorly answered question.

We are going to take a punt and suggest that if you have asked this question or are reading this answer you already have some feeling and thoughts on the matter. You aren’t alone.

In Sydney, approx. 40% of properties are sold using auction, leaving 60% of sales being sold via private treaty. Both methods are used in the market place and both methods can and do create great sale prices. Just as importantly for some, both have been known to create great disappointments. No system is immune to problems, no system is perfect or right for everyone and every situation. So how to choose?

Most agents start off with a list of advantages of private treaty and a list of advantages of auction and then they say, ‘This is what you get with each, which one do you want?’ This is not always the best way to form your decision.

Let’s start off with some basics, the first is how similar is this to other properties on the market? The more similar it is to others on the market, the more competitive your property will need to be to find a buyer. The differences in the property need to be important to a group of buyers. You can have a lot of small old houses on the market but if your one is fully done up or conversely, badly in need of work then it may appeal to buyers who are not so attracted to the others on the market. You now have competitive advantage or better still, competitive difference and an auction needs competitive difference to work. Units typically vary to some degree but still mainly appeal to the same type of buyers. That’s why few units are auctioned.

The second factor is the size of the target market that has an interest in the property. You can have a very unique property, but if you need a very unique buyer who is few and far between, then it’s likely you don’t have buyers to drive an auction.

Making the decision is then a process:

  • Do you have a market that has a number of buyers who would be keenly interested; yes, it could be an auction; no, it’s a private treaty.
  • Next, does it have a uniqueness that allows you to sit on the market for 4 weeks while we collect buyers and without losing them to other properties? If it’s yes to both, it’s worth auctioning.
  • If it’s no to both its definitely best as a private treaty and if its yes to one and no to the other, then there are other ways to approach the sale such as a tender or price ranging.