There are different methods of sale when it comes to real estate. The favored method depends on the market, their understanding of it, and the circumstances that can affect the sale. When you are able to choose which is the best one, you can achieve outstanding results.
As the seller, you can either pursue auctioning the property, or entering a private sale. What is important is to understand the difference between both and choose which suits the situation.
What is an auction?
Auctions are not that uncommon in the Philippines as you may think it is. Agencies and organizations from private and public sectors often host auctions for common items such as artworks, antique furniture, collectibles, watches, and more. However, one kind of auction that is currently gaining popularity in the country is property auction.
A property auction, as defined by McGrath, is the sale of a property where prospective buyers gather to bid on a property. The theory behind this method of sale is that your property will sell at true market value at a particular moment in that duration of the auction.
How this works is that you set a date, time, and venue for the auction to take place. Over the several weeks leading up to the auction, you conduct a marketing campaign. During this period, prospective buyers are given a price guide to which you will receive feedback depending on the general interest in your property and its quoted price.
What’s good about auctioning your property is that there is no price ceiling. However, you do need to set a reserve price, which is the minimum amount you are willing to sell the property for. You can base this from the buyer feedback you’ve received during the campaign period.
Generally, there is no cooling-off period for the buyer and seller once the property has been sold in the auction. Property inspection and approval of finance are usually done before the bidding at the auction.
In case the bid for the property does not reach over the reserve price let alone the minimum price, you can continue marketing the property with an asking price and will be open for negotiation.
Auctions can either be public or private. Private auctions are those that are held behind closed doors and are only for registered bidders. This is best for highly expensive properties.
To put it simply, the benefits of an auction are as follows:
- Given that there is a certain period to which the property is on sale, this creates a sense of urgency for prospective buyers to purchase the property.
- There is no price ceiling, thus you will be able to sell it higher than the reserve price.
- You are protected by the reserve price, hence your property won’t sell for a price lower than the pre-agreed level.
- There is no conditional contract for sale when it comes to auctions.
What is Private Sale?
A private sale, also known as a ‘private treaty,’ is a method of sale wherein the property is listed with an asking price. Prospective buyers will negotiate for the price of the property. The one with the closest offer to the seller’s price gets to purchase the property. With this method of sale, it is important to understand the property’s value. That way, you will be able to set a realistic price for your property.
Unlike auctions, this gives you more time to consider offers by the buyers as well as more time to have your listing up in the market. Moreover, prospective buyers do not necessarily know what other buyers are offering to purchase the property. Negotiations are more private and are between the buyer and seller or agent.
This method has a cooling-off period wherein the buyers get to inspect the property and have their finances finalized. They are also able to back out from the sale based on certain conditions.
Here are the benefits to a private treaty sale:
- Having a fixed asking price helps buyers to have a clear idea of what your desired sale price is.
- This is the tried and tested method of selling a property.
- This kind of sale leads to a faster negotiation process.
How can you decide on which is the best method for you?
The best way for you to arrive at a sound decision is to research, research, and RESEARCH! Get to know as much as you can about each method of sale and weigh up all the pros and cons to support your choice. Don’t forget that each method comes with its own set of costs — but also arrives at the same destination, which is to make that sale. It all boils down to which journey you are willing to take to arrive at that sale.
Whichever you may choose, make sure that you are comfortable with the method and well versed with the requirements that come with it.
Sources:
Lefebvre, S. (2020, February 21). Understanding the different ways to sell a property. Retrieved August 04, 2021, from https://www.mcgrath.com.au/advice/articles/understanding-the-different-ways-to-sell-your-property
LJ Hooker real estate - different ways to sell your property. (n.d.). Retrieved August 04, 2021, from https://www.ljhooker.com.au/sell/different-ways-to-sell-your-property
Merrick, P. (2019, March 28). Auction vs private sale - which should i choose? Retrieved August 04, 2021, from https://www.therealestateconversation.com.au/blog/paul-merrick/auction-vs-private-sale-which-should-i-choose