Auctions vs Private Sales
Whether a first-time buyer or someone buying another home, you will encounter auctions and private sales. These are the two ways you will usually encounter when purchasing a house. The other two ways are both similar and are an expression of interest and tender but we will not be going through those in this blog. What is the difference between auctions and private sales and when will I have to choose to attend an auction or a private treaty?
Auction
When a seller decides to sell their house via Auctions, a date is set for the auction to be held and is usually organised by a real estate agent or an auctioneer. Potential buyers can then arrive on a set date to bid for the house on sale, the highest bidder will win the sale of the house. Once the property is sold to the highest bidder there is no cooling off period, when the house is sold it’s a done deal so be prepared to pay a deposit on the day. Auctions can be fast paced and the competitive nature of bidding can overwhelm people so here are some tips if you decide to buy at an auction. There are also pre-auction offers and these are offers you can make before the auction date which could result in the property being sold to you if the seller likes your offer or have the auction date be set earlier where your offer will be the starting price of the auction.
You should focus on how much you can realistically afford and don’t over bid what you are comfortable paying for the property.
If you believe you will get stressed under the pressure of bidding, you can hire a buyer’s advocate to help you in the bidding process.
There are conditions to the sale of the house in auctions, you should understand these conditions and when the settlement date is of the property.
As the highest bidder, you will still be able to negotiate prices with the seller
The public nature of auctions may also be a benefit for you as you will know what prices you will be competing against. There are strict rules on how an auctioneer must run their auction. The Victorian laws on auctions must be displayed at the place the auction is being held and must be displayed for at least 30 minutes before an auction starts. The auction rules are set in accordance to the Sale of Land (Public Auctions) Regulations 2014. The auctioneer will then outline the rules to the buyers before bidding starts. You can still ask some questions about the property, contract and auction but you must be careful to not disrupt the auction as that is illegal in the state of Victoria.
Private Treaty
A private treaty/private sale is definitely not as fast paced as an auction. In private treaties instead of bidding you will make offers to the seller. Unlike auctions you will also be able to discuss setting inspection dates when you are free instead of making time on a set date like an auction, you will also be able to negotiate the set price of the home. If you decide to buy through a private treaty, you should know:
Instead of going to a public place to bid, the property is advertised and buyers are invited to make an offer
There will be a cooling off period which means the seller can pull out of the sale if they change their mind
No pressure on paying deposits when making an offer, there is more time to negotiate prices.
Greater overall flexibility in contract of sale, negotiations and discussions of the properties sale.
Unlike an auction, negotiations for houses can drag on as there are no deadlines and you wont know what prices you are competing against.
Information Disclaimer:
Any advice provided is general and does not take into account individual objectives, financial situation and needs. All individuals should consider whether the advice is suitable for them and their personal circumstances.
