Public auction or private treaty?

Public auction or private treaty?


Public auction

At public auction the property is sold to the highest bidder, after the vendor’s reserve price has been reached or exceeded. There is no cooling off period with auctions and contracts are exchanged immediately following the sale. This contract is unconditional and the successful buyer will be required to pay an immediate deposit, usually 10 per cent.

Public auction is widely regarded as being an appropriate method of sale of residential property in circumstances where one or more of the following factors are present:

  • The market is buoyant and properties are selling in response to strong consumer demand
  • The property is unique and difficult to value, making the setting of an asking price challenging
  • A lack of recent comparable sales from which to estimate the likely selling price
  • The vendors are comfortable with the attendant pressures of auctions

The theory behind the desirability of auctions is that where there exists more than one qualified purchaser for a property spirited bidding between the parties at the auction will drive up the eventual sale price.

The other major argument in favour of auctions is that it provides a timeframe to the sales process, thereby focusing the attention of the market on the subject property and creating a sense of urgency amongst prospective purchasers.

Private treaty sale

When vendors place their property “For sale” they are selling by way of private treaty.

A private treaty sale involves selling through the setting of an asking price, and negotiation around that asking price. Vendors must establish an asking price that will be competitive with other comparable properties being offered for sale. It is important to get this asking price right. An asking price that is too low will make it difficult to negotiate purchasers up to the correct price range, and an asking price which is too high will deter prospective purchasers from giving the property serious consideration, and the property may sit on market for too long, and end up selling for less than it should have if it had been priced correctly.

Private treaty sales can be marketed in a number of ways. The usual method is to set an asking price. Alternatively some selling agents will advertise a price range, or call for expressions of interest without nominating a price.

Those who advocate this method of sale suggest:

  • Some prospective purchasers are uncomfortable attending auctions
  • Some vendors are not suited to the stresses of the auction process
  • It is possible to market the property more cost-effectively than an auction
  • It is relatively easy to estimate the likely selling price of most properties

Each method of sale has its advantages and disadvantages.

The appropriate method of sale should be determined after careful consideration of a number of factors including the prevailing market conditions, the nature of the property to be sold, and the personal circumstances of the vendor.


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Public auction or private treaty?