The Different Methods of Sale

Selling your home can be daunting, especially with the number of choices you have to make. It’s important to make sure you’re informed and making the right decision. A major decision to make is the method of sale, HOW are you going to sell your home.

You probably know and understand a few but we’re going to highlight the four most common methods:

Auction

An auction is the best way to achieve a premium, or fair market value, for a property.

Auction involves a short, sharp and intensive marketing campaign of a property without a price. This tests the market to see what buyers, in a competitive situation, are prepared to pay for the property. The auction offers a real opportunity to potentially get more for a property than the Vendor (aka. Seller) might expect.

The objective is to have the highest price possible offered by a fair market for the property by the end of the auction campaign.

A well-run Auction programme takes more time and effort for the consultant but will ensure that the property gets the maximum exposure. It is the method that offers the highest degree of responsibility and control shared between the consultant and vendor.

An auction adds:

• A deadline.

• The confirmation of value and desirability by other buyers/bidders.

• Reasonable Competition among buyers/bidders.

The Auction process:

1. The lead-up period.
   A high profile auction marketing campaign will highlight the property. This produces the greatest exposure during the period when enquiries are to be at their highest.
   Prior to the day, the Vendor will confer with their selling agent and set, in writing, a ‘reserve’. A “reserve” is the minimum price the auction must meet for the sale to be accepted. Once this is set you’re ready for auction day.

2. The auction. This is the shortest part of the process.
   Prospective buyers will attend a place of auction. This is either the property itself or more likely the Selling Agent’s office. Upon a schedule, the property will be open to the forum for bids. These bids are considered ‘cash unconditional’.
   Upon closing, if the reserve is met, the property is sold and the contract settlement process starts. If the reserve is not met or there are no bids then the property is “passed on” and remains available. This is the post-auction period.

3. The post-auction period which some people believe is a sign of failure is not true.
   This period allows the vendor to negotiate with potential buyers. Due to the offers being unconditional at auction, there may have been some buyers who could not have bid without conditions. For example, a Buyer may need to sell another property or arrange finance before they can commit themselves unconditionally at auction. Rather than giving you both just one change, this period allows you to make arrangements for the successful sale.

Tender

Tender is another method which allows vendors to create a competitive situation without stating a listed price.

Like an auction, tender involves an identical marketing strategy. The basis here is that the property is sold with the same level of information and urgency but without an official auction. 

This increases the number of enquiries, inspections and opportunities to obtain the best price for the property. Tender also affords more control to the vendor. The vendor doesn’t have to accept the highest price. They choose to negotiate with any of the tenderers to achieve a satisfactory conclusion.

During tender, the vendor sets the terms, conditions and the deadline, while prospective buyers have only one opportunity to put forward their most competitive offer.

Tender adds:

• A Deadline.

• Better Vendor Control.

• Reasonable Competition among buyers/bidders.

The Tender Process:

1. The Lead-up period including high profile marketing campaign.

2. Interested Parties then put their offer, usually a normal Sale and Purchase Agreement/Contract or a specially prepared Tender Document.

3. These offers are sealed in an envelope and deposited in a Tender box, by a predetermined date and time.

4. All offers are held by an appointed party, usually the sales consultant, in a Tender box.

5. All offers are then opened together, allowing the vendor to choose the most favourable one.

6. A time frame is often given for those offers to be considered.

Price By Negotiation (PBN)

Price by Negotiation is effectively an open conversation sale and can be applied in any of three ways:

1. No price is advertised, much like an auction or tender but without a deadline.

2. A minimum price is advertised and offers above this minimum price are considered by the seller.

3. A price range is advertised and offers within the price band are considered by the seller.

In any case, this again allows for maximum exposure to the market and greater vendor control. Price By Negotiation is well suited to vendors who are capable to let offers go by. Due to the lack of urgency, the competition is less but affords the vendor the patience to wait for the right offer.

PBN Adds:

• Vendor Control.

• Flexibility. (e.g. Starting with no price and reveiwing the market value of the property then setting a price range)

• Limited Competition among buyers/bidders.

The PBN Process:

1. Lead up period and marketing campaign.

2. Interested Parties submit their offers when ready.

3. These offers are considered once submitted until one is successful.

4. All parties are notified if their offers were successful or unsuccessful.

Fixed Price

Fixed price is when the property is listed with a definite price.

Interested buyers can simply accept the price and terms as conditional or unconditional and complete the sale.

Fixed Price Adds:

• Complete Vendor Control.

• A Simple process.

• When Priced correctly, limited competition among Buyers.

For questions about the above information or to speak with an expert real estate agent about selling your home, contact us today for your free property appraisal or call Dylan Foote on 027 473 8371.