Picture this: you’re strolling down a sunny street, past those cheeky terrace houses, or weaving through laneways with their hidden coffee havens. And then, bam! There it is, the house of your dreams, winking at you from across the street.
Now, the question on your lips: How do you snag this beauty? Do you dive into the ridiculous world of auctions, where emotions run high and wallets empty quickly, or do you take a chill stroll down the private sale path, negotiating like a pro and sipping on cold, hard facts?
Learn about how auctions and private sales differ, and find out which option is best for you.
Auction Vs Private Sale: What’s The Difference?
The key differences between an auction and a private sale are:
|Auction has a fixed time limit for the sale of the property. If you’re the successful bidder, you will sign and exchange contracts on the auction date, soon followed by settlement on a later date.
|A private sale may not have a fixed time limit for the sale of the property. As a first-home buyer, you may find this way of buying a house time-consuming, bureaucratic and frustrating.
|Once signed and exchanged, the contract of sale is legally binding and enforceable. It means you cannot withdraw from the purchase for any reason if you win at auction. There is no such thing as a cooling-off period or a finance clause.
|Private sales offer a cooling-off period, usually five days, after the exchange of the contract, which allows you as a buyer to withdraw from the purchase for any reason. The cooling-off period may also be slightly longer in certain cases.
It also has an option for a finance clause, which allows you to cancel the purchase if you can’t get loan approval.
|Auction takes place in public and offers less privacy for both parties involved.
|Private sale occurs between a seller and a buyer through private negotiation, offering much privacy.
|Auction creates a sense of urgency in buyers’ minds, which makes them more competitive and emotional. That, in turn, leads to fuzzy thinking and reckless decisions at auction.
|Private sale allows you all the time in the world to go through every step of the homebuying process carefully. That is quite important for most first-home buyers.
|Competition fuelled by high property demand can easily drive the property auction price up.
|The property price may rise or decline depending on the broader market trends and the number of offers they receive.
|An auction has a reserve price, which is the minimum price that the seller will accept. It is not subject to any negotiation with the buyer.
|Private sale has an asking price, which is the ideal price that the seller will accept for the property. It is subject to negotiation with the buyer.
|A successful auction for a seller generally requires a good, expensive marketing campaign.
|A modest marketing campaign may suffice for a private sale.
Auction Vs Private Sales: What’s More Common?
High-Demand Markets: In major cities like Sydney, Melbourne, and Brisbane, where competition is fierce, auctions can be a powerful tool for maximising value. Freestanding houses in the $1-4 million range often attract a strong pool of passionate buyers, potentially driving the price beyond initial expectations.
Emotional Appeal: Auctions tap into the emotional appeal of a property, creating a sense of urgency and excitement. This can be particularly effective for properties with unique features or potential, leading to higher bids from buyers willing to pay a premium.
Lower Value Properties: For properties below $1 million, private sales offer a more efficient and cost-effective approach. The lower price point often means fewer potential buyers, and sellers are much more willing to negotiate.
Regional Preference Or Niche: In regional areas or for unique properties with specific buyer interests, private sales can be more targeted. Finding the right property requires a more personalised approach than a general auction might offer.
Investment: When the property is primarily aimed at investors, private sales provide a platform for negotiation and flexibility. Investors prefer to analyse and make calculated decisions, which private sales facilitate better than the competitive frenzy of an auction.
Off-Plan: Private sales allow for greater control over information and buyer engagement for off-the-plan properties still under construction or in the planning phase.
Exclusive Properties: For properties at the very top of the market (worth tens of millions), discretion and privacy often take precedence. Private sales offer a more controlled and confidential approach, catering to the needs of high-net-worth individuals.
Choosing The Best Option For You
If You’re Considering An Auction:
Experienced Buyers: If you deeply understand the market and are comfortable with swift decision-making, auctions could be an exciting platform for you. They offer a dynamic environment where you can secure properties at competitive prices.
Investors: Auctions can be a goldmine for those focused on maximising investment returns. They often present chances to purchase properties at lower costs, which is ideal for flipping or expanding your portfolio.
If You’re Leaning Towards A Private Sale:
First-Time Buyers: The property market can overwhelm first-time buyers. Private sales tend to be more relaxed, allowing you to take your time, assess all options carefully, and avoid the pressure of quick decisions; private sales might be more suitable for you.
Skilled Negotiators: Those who excel in negotiation and communication may find private sales more advantageous. This setting allows you to leverage your skills to negotiate better terms, possibly leading to a more favourable purchase price or other benefits.
Type Of Property: Some properties, particularly unique or high-value ones, are more commonly sold at auctions.
Market Dynamics: In a fast-paced, competitive market, auctions might be the only way to secure a highly sought-after property. Conversely, in a slower market, private sales may offer more room for negotiation.
Financial Flexibility: Consider whether there is room to increase your loan amount and deposit. If so, auctions might provide more flexibility; otherwise, a private sale may be more prudent.
Take The Next Step!
As experienced mortgage brokers, we’re here to support you every step of the way, whether you’re thrilled by the energy of an auction or prefer the thoughtful approach of a private sale. Your decision is unique, and we’re ready to assist you in making an informed choice.
To speak with one of our mortgage brokers, call 1300 889 743 or complete our free online assessment form.