Sale by private treaty v's auction

[Ecogirl]

Hi Guys
It's been a while since I've been around as I've been focussing on other things in my life. I'm back thinking about property again and am planning to buy the property I'm currently living in in Brissy. Anyway....

I am in the process of working out how to sell my house in Cairns. I approached an RE Agent who others have dealt with on the forum and he has 27years experience in Cairns (some will work out who it is). He has suggested to sell it by auction. I have never sold a house before. See email below...

Dear Amanda,
Thank you for the opportunity to appraise your home at xx Street, Bungalow.
I have researched sales in the area and have attached your Comparative Market Analysis and have taken your home to be in good condition internally.
As discussed I believe an auction would be an ideal way to market your property as it negates any building, pest and finance and cooling off periods and results in a cash unconditional contract.
It also gives me an opportunity to over achieve on your sale price if we have a competitive auction.
I look forward to your further instructions and can fax or mail the authority forms to you when required.
All the best,

He has said that because the house needs a few new stumps, guttering etc that he recommends the unconditional sale of an auction. He has said that there will be 4 weekends of open house, then the auction. I told him it would be perfect for an investor because the tennants have have been there since it got rented, they look after the ppty and they pay market rent.

I told him that I am on SS and got his details from there. I am concerned about the auction process because of the additional costs if it doesn't sell and potentially being pressured on auction day to reduce my reserve if no one is bidding. He told me that his reputation is at stake and he wouldn't recommend this way if he didn't think it was the best way to proceed.

- My question is - should I sell by auction or private treaty?
- What have been people's experience selling by auction?
- Is an ordinary 2 bedroom home auction material?

He is the professional and I feel I should be guided by him but I have my reservations. I was going to get a building and pest done and so not have that clause in the contract (I was going to provide this to all serious buyers). This will also reduce the disruption to my nice tennants. I was also going to give my tennants a week free rent and movie tickets to say thanks.

What are your thoughts?

Cheers
Amanda

 

[CairnsAgent]

Hi Amanda,
Please take this advice without bias.
Ask your intended agent what the current auction clearance rates for Cairns are and what there personal clearance rate is.

Dont be worried about minor repairs that need to be done, just be prepared to negotiate on these when picked up by the buyers inspector.
I encourage vendors to use auction when it is hard to price a property (it is unique or no data to compare).
It is a high demand property.
Or like your agent has indicated when there is alot of repairs..however most potential buyers will still have a building/pest inspection done prior to auction and will bid accordingly anyway.
A valuation will also be required prior to auction for the buyers finance, bank valuers are notoriously conservative, so they will tend to value a property that needs a lot of work accordingly.
I think I know the agent you are considering and if I'm correct in my assumption he is a very well respected agent here in Cairns and should be able to get a result for you.

I hope this helps.

cheers

 

[dcarr]

Try and think like a developer for a bit...

- is your property well located
- house of negligible worth (try not to think about all the improvements you made!)
- good size block
- could it be developed easily?

If so, then your agent is suggesting an Auction to coax all those investors out of the woodwork.

 

[Twitch]

He has said that because the house needs a few new stumps, guttering etc that he recommends the unconditional sale of an auction.

Ecogirl, that is not a good reason to sell by auction. Better reasons to sell by auction are:
- because of either the nature of your property, or because demand is currently very high in the area; your property will have multiple bidders
- auctions are a common method of sale for your type of property in your area
- due to the unique nature of your property it is not possible to estimate a sale price in advance

Do any or most of the reasons hold for your property? If none do then I seriously doubt auction is the right method. If at least 2 do then auction probably is the right way to go.

good luck

 

[yo yo ma]

- My question is - should I sell by auction or private treaty?
- What have been people's experience selling by auction?
- Is an ordinary 2 bedroom home auction material?

He is the professional and I feel I should be guided by him but I have my reservations. I was going to get a building and pest done and so not have that clause in the contract (I was going to provide this to all serious buyers).

Hi Amanda
I don't think you can get an absolute answer to whether to sell at auction or not... sometimes you win, sometimes you don't. I have been to auctions that have got 2 parties interested & they have gone way over reserve. As Cairns Agent said, "if it is a high demand property" auction is usually the best way to go. Also looking at the auction clearance rates gives a good indication.

I auctioned my unit in Sydney in 2001... Unfortunately the timing was just after 9/11, the market was flat & I got $10k less than quoted originally. Yes I felt pressure to accept & did do that reluctantly. Anyway, we move on & have it as a learning experience for next time.

I would probably go with the agent & see how it goes. Discuss the reserve with the agent a week before the auction when not under pressure. Have your limits & stick to them. Just maybe go with your gut feel & learn from it.

Check out what is happening with the market up there (I don't know it) & if it is going along well, use auction. Let us know how you go when it is all over.
Steve

 

[moorew]

Hi Amanda,

I'd take a look at what seems to be the most popular method of selling for similar properties in the area. If your type of house is mainly sold via private sale, an auction may not be appropriate. But if the market is hot and auctions are well attended with multiple bidders, that may be the way to go.

I'd attend some auctions in the area to gauge the mood.

Wendy

 

[Ecogirl]

thanks everyone for your help
I shall do more research and ask him a few more questions. I'll let you know how I decide to proceed and how it goes for me.
Cheers
Amanda

 

[Kevin Hockey]

My personal opinion is not to Auction anything but there may be circumstances where it may be prudent. I don't know Cairns market but I assume the property is an IP and a tenant is in place which probably means the property will not be presented in it's best condition. Auctions are mostly used by agents to "condition" an owner, get a quick sale and maximise the advertising of the property.

I recommend private treaty with a price based on evidence of other sales plus a quality marketing campaign designed to attract the right buyers to the property.

Good luck

Kev
www.gogecko.com.au

 

[Ecogirl]

I just wanted to let you guys know what i decided and how it panned out.

Thank you for your help as this was all new to me and at the end of it it all seemed rather easy. I really wasn't comfortable selling by auction and I decided to listen to someone I know (thanks guys) without a vested interest as opposed to a salesman from Cairns who may have heaps of experience and is well respected there. He really didn't listen to what I wanted and didn't take my cues about how i was uncomfortable with selling by auction - a lesson for all those in sales.

I spoke to my PM and she also sells ppty. She priced it the same as the RE Agent (and the research I did) and she offered to pay the advertising costs since I was her client. I figured why not as it will save me $$ and I don't have anything to lose.

She advised me that realistically my house was worth ~260k (which is what the other also said) and she will put it on realestate.com and her website and the local paper. She doesn't do the massive advertising like the others. I asked her to increase the advertised price to $262 500 to give me more negotiating room without being unrealistic. I wanted to sell the house for at least $257 500 for me to meet my financial goals.

I had an offer for what I wanted the next week - the buyer was told I wasn't negotiable and that since I wasn't in a hurry I would wait for the right person who would meet my price. I also said I was selling 'as is' and not negotiating on the build/pest report. It needed new gutters and a couple of stumps but apart from that it's solid.

So I sold it for what I wanted and I got an extra $2500 for asking for it - bargain! My bank didn't want to release the mortgage but I expected that - settlement was delayed for a week because of it. The buyer actually moved in two weeks before settlement cos the PM said she could (after the contract went unconditional) - minor detail and not what I wanted exactly but it worked out ok in the end.

I decided not to stress about the whole process and I didn't but that's because I was not under a time constraint.

So considering I bought the house for 89k a few years ago and the FHOG paid for the 3 spilt systems that house was good to me. I didn't spend a heap on it at all and had the same tennant for the whole time.

So shortly I will be speaking to my broker about buying the house I'm currently living in. What I have learnt is that selling isn't too scary at all provided you do your research and have quality advice.

Thank you to those that helped me as I really appreciate it.

Cheers
Amanda

 

[ffc1883_1996]

Well done Amanda. Auctions only suit the selling agent - not the vendor or purchaser.