Selling your home is a significant decision in anyone’s life and one of the first steps is determining the best method of sale.
In New Zealand, the two most common options are auction or private treaty (sale by negotiation). Both methods have their advantages, and the right choice depends on your goals, property type, and market conditions.
Selling at Auction
An auction is a time-defined sales process where potential buyers bid publicly, with the property sold to the highest bidder (assuming the reserve price is met). Auctions are particularly effective in competitive markets where demand is strong.
Advantages of Auctions:
- Transparency: Buyers bid openly, allowing you to see the competition and to know what they are prepared to pay for the property. This helps in providing you with market value confidence of the property.
- Speed: The process is quick, with a predetermined auction date designed to create urgency.
- Certainty: If the reserve price is met, the sale is unconditional, offering assurance to sellers that the property is sold.
Considerations for Auctions:
- Auctions can be intimidating for some buyers, potentially reducing the pool of interested parties.
- Auction bids can only be taken from buyers who have completed ‘Bidding registration’ paperwork
- Auction bidders bid on an ‘unconditional basis’. All due diligence must have been undertaken by the buyer prior to the auction.
- If the reserve isn’t met, the property may pass in, and you’ll need to negotiate with interested buyers, possibly on a ‘conditional basis’
Selling by Private Treaty
Private treaty sales involve several different alternative selling methods. Private treaty sale methods include ‘Deadline Sale’, (also known as a ‘Set Date of Sale’) ‘Price By Negotiation’, (aka PBN, By Neg), or a ‘Fixed Asking Price.
This method is often to all buyer types, cash unconditional buyers as well as conditional buyers including those with a house to sell. It offers a lot more flexibility and can suit properties with unique features or in markets with less buyer competition.
Advantages of Private Treaty:
- Broader Appeal: Some buyers prefer this method as it feels less pressured.
- Control: You can consider each offer individually and negotiate terms that suit you.
- Privacy: Negotiations are conducted privately, unlike the public nature of auctions. Occasionally with the Private treaty method, there can be multiple offers made on the property by different buyers all at the same time. This can work in a seller’s favour as the ‘multi-offer’ process is a defined process that asks participating buyers to make their very best offer first time as they may not be given a second opportunity to improve on their offer.
Considerations for Private Treaty:
- The process can take longer, as it relies on finding the right buyer and unlike an auction, an agreement between buyer and seller can involve a conditional period, often 5-15 working days which can involve finance approval, a building report, due diligence, lawyers approval, and even a house sale.
- Setting the asking price too high can deter buyers, while pricing too low risks leaving money on the table.
Which Method is Right for You?
The best approach depends on your property, your timeline, your appetite for an intense campaign and the current market conditions. For example, auctions are highly effective for homes in high-demand areas or with unique appeal. Conversely, private treaty works well for properties requiring a tailored marketing strategy or in a balanced market.
Consulting with an experienced real estate professional is the key to success. They can provide insights into buyer demand, market trends, and the strategy most likely to achieve the best result for your property at the current time.
Beware though, of talking with any agent that insists on an auction only strategy as there is no ‘one-size’ fits all method in real estate.
Whether auction or private treaty, the goal is the same: achieving a premium sale price that you’re delighted with.