In Melbourne, real estate auctions always attract attention. They can be a spectacle, they can be loud, and emotional, and they can be stressful at times. It is widely believed that they are the most effective method of selling a home, but they are certainly not the only one. In Australia, the most common method is actually the private sale (or private treaty). In order to use the right method, you need to understand what each one entails. Local market conditions and the type of property will determine how a property is to be sold.
What do I need to know about auctions?
At an auction, interested parties submit bids to buy a property on the day. This is often carried out on-site, but it can also take place in a boardroom, or more recently, via Zoom. The bidder with the highest offer becomes the successful buyer and is required to pay the deposit (usually 10%) immediately. This sale is final, with no cooling-off period involved. Before the auction takes place, there is a sales campaign that runs for approximately four weeks. The inherent deadline creates a sense of urgency and drives up competition among buyers. Bids are made public, so the true market value of the property is usually clearly indicated. This creation of competition is the key benefit of an auction in real estate sales. Whether you are a buyer or a seller, it's important to establish whether an auction is the right option for you.
What does a private sale involve?
A private treaty is a name for a sale by negotiation. This is when a property is advertised by a real estate agent at a set price. Buyers make offers to the vendor in writing, and the vendor will accept the most favourable offer they receive. The negotiating with the buyer is generally handled by the agent. Agents also advise vendors on whether they should accept or decline an offer, based on the estimated value of the property and expectations in the market. Strategy is key, so the experience of an estate agent is considered very useful. There is a standard cooling-off period for private treaty sales and it varies from one state to the next. During this period, buyers can have building surveys and pest inspections carried out. This can reduce the stress for buyers as opposed to an auction, where such inspections must be carried out before the auction takes place. Additionally, submitting offers makes it easier for buyers to get an accurate idea of the property's true price. This reduces time wasted exploring properties that turn out to be beyond their budget. Auction is often preferred by vendors, but a private treaty is not without merit.
What is an expression of interest?
An expression of interest, or tender, the campaign invites buyers to submit their best offer by a predetermined closing date. At this point, the vendor selects the most suitable offer. It resembles something of a slow, blind auction in which the terms and conditions can be set by buyers. Having a closing date creates the same sense of urgency as an auction. But the private nature of the arrangement means the accepted offer can be kept discrete. The expression of interest route is quite common for unique or expensive properties, where it is often seen as the only way to make a sale. The number of offers is usually low, and the gap can be substantial. It can help realign vendor expectations with the market.
Nelson Alexander has been delivering real estate services for 50+ years across Inner Melbourne and the surrounding areas. We are not like our competitors, so we believe we have a real competitive edge and deliver exceptional service to our customers. We focus on trust, transparency and aiming to do right by our customers. This has enabled us to establish our place as a core part of our community.
If you would like to learn more about how we operate, or to get the ball rolling on a property purchase or sale, please don't hesitate to get in touch.