Selling your home via private sale vs at auction

When it comes to selling your home, your main goal is likely to achieve the best price in the shortest amount of time. But which selling method will more likely see you achieve both these outcomes – an auction or a private sale?

To understand which method would best meet your needs, it’s important to understand the difference between them.

How does a private sale differ from an auction?

The one clear difference between private sales and auctions is pricing.

With a private sale, the seller gets to set the price they wish to sell for, generally using a real estate agent to sell the property on their behalf. The process can involve viewings and open houses to showcase the property to potential buyers and usually doesn’t come with a set date the property must sell by. A sale is generally made when the seller agrees to a buyer's offer submitted via an agent.

Alternatively, an auction involves a campaign that culminates in potential buyers bidding against one another on a set date to secure a property. Sellers can set the price they want to sell for, known as the reserve price, as well as the auction and settlement dates. The property goes to the highest bidder at the auction, provided the bid matches or is higher than the seller’s reserve price.

Both methods have their advantages and drawbacks. Sometimes, one may be better than the other due to particular market or individual circumstances. Here are some pros and cons of each to consider.

What are the pros and cons of private sales?

Let’s start with the pros of selling your property via private sale:

• Without an auction day deadline, there's generally time for more buyers to inspect and more offers to be fielded

• Sellers have greater flexibility for negotiations on price and contract conditions

• Private sales can be less intimidating and stressful as it's a slower process without the pressure of a fixed deadline

• Private sales are generally less expensive than going to auction, with sale costs borne by the seller

• Private sales allow more time to prepare for home inspections and viewings

• Potential buyers expressing interest in your property are more likely to be serious than those who inspect your house before an auction

• A private treaty provides greater privacy and enables sellers to keep the specific details of the sale out of the public eye

On the other hand, there are some disadvantages to undergoing a private sale:

• It's a slower process and you may need to be patient

• Buyers will often try to negotiate below your asking price, sometimes leading to fruitless or prolonged negotiations

• Risk of setting the wrong price — you could misjudge the market and set the price too low

• If you set the price too high, it will leave the property sitting on the market for a long period of time, leading buyers to question what’s wrong with it

• Private sales are usually subject to a cooling-off period (this differs by state) and, as a result, the buyer could change their mind even after contracts have been signed

What are the benefits and disadvantages of auctions?

Selling by auction also has its fair share of advantages and disadvantages. Here are some of the pros of putting your property under the hammer:

• Auctions hasten the selling process as sellers (along with their agents) set the auction date (although the agent can sell the property before auction, on the day, or directly after)

• A sense of urgency and competition among potential buyers on auction day may push the selling price past your reserve price, sometimes well past it

• You can set specific terms for the sale and nominate the settlement date

• Buyers at auction are bound to proceed with the sale as properties bought at auction are not subject to a cooling-off period

However, there are also several catches to selling at auction:

• Auctions can rely on wide and expensive marketing campaigns to attract enough potential buyers to bid on auction day

• There may also be costs associated with promoting and running an auction — anywhere between $5,000 and $10,000 – which will be charged even if the property doesn’t sell

• You may feel pressured to sell your property as quickly as possible, particularly if you feel you've already invested a lot of money in the auction process

• Some potential buyers may be intimidated by the auction process and be put off being part of the bidding process

• Once a property is passed in at auction, it may put off potential buyers who could assume the reserve price is too high for them

See also: How to win in an auction

Which one is best: Selling via auction or private sale?

As with most things, there is no hard and fast answer as to whether auctions are better than private sales, and vice versa. It depends on your own circumstances and property market conditions at the time.

Here are some things to consider:

What is the market doing?

How the local property market is performing is one of the biggest factors to consider. Research how similar property sales have performed in your suburb. A real estate agent should have ready access to all the latest data, including selling prices achieved and time properties have spent on the market.

If properties are on the market for a relatively short time before selling, this can indicate strong demand - a ‘sellers' market' - or that properties may be scarce in the area. This may be more conducive to achieving a higher price at auction as potential buyers bid against each other to secure your property.

However, there’s nothing stopping you achieving the same price if you proceed with a private sale. You get to set your price through both processes. Though, if there’s limited demand from buyers, you might find your property is passed in at auction or that you don’t achieve as high a price as you might have hoped.

What type of property are you selling?

If your property is in a sought-after location, renovated, in good condition, or has attractive or unique features, you may decide to ‘test the market’ by putting it to auction. If you expect it to be in high demand, this may be a good strategy.

Alternatively, if your property appeals to a niche buyer, you might wish to sell privately to give that buyer a better chance of finding it and yourself a higher chance of a successful sale.

Do you have a deadline to sell?

There are any number of reasons you may want your property to sell by a certain date. A common one is that you may have purchased another property and need your sale to go through to facilitate the new purchase.

Auctions can, in effect, set a sale deadline, although there are a number of variables that can affect this including a slow or cool market, low buyer interest, or simply not achieving the price you want for it.

If you have no deadline and aren’t in a particular rush to sell your property, opting for a private sale can give you time to study the market and achieve the price you’re aiming for.

What is your budget?

You also need to consider how much you want to put towards the cost of marketing your property and potentially conducting an auction. Auctions can be considerably more expensive than private sales, so be clear about how much you wish to spend to achieve a sale.

What does your real estate agent advise?

A real estate agent works for you so listen to their advice on what they believe is best given the local market, your property, and your individual circumstances, but always do your own research and make your own decision. Ultimately, it’s best to do what you’re comfortable with.