Selling Your Home: Method of Sale
There are two ways you can sell your home: Private Treaty or Auction
Selling by private treaty
This is the most common method of sale in Australia. In essence, your home is advertised at a price or in a price range and buyers are invited to submit offers. This method generally takes more time to achieve a sale. The statistics for private treaty sales are expressed as Days on Market(D.O.M)
Each suburb will have an average amount of days it takes to sell a home. This is crucial information for you “the seller” because it tells you how many weeks, months you will take to sell your home. Especially if your home is over priced.
Unfortunately, homes are not like fine wine- the longer time on the market usually results in a lower price.
Private Treaty Sales always allow for a 2 day cooling off period (South Australia) And are often (but not always) subject to conditions such as:
- Building & Pest Inspection
- Sale of a property
- Settlement of a Property
A buyer is entitled to a cooling off period of two clear business days during which they can withdraw from the sale. The cooling off period starts after both you and the buyer have signed a contract and the buyer has received the Form 1.
Selling by auction
The key differences between an auction and a private treaty sale can be summed up as follows:
- NO COOLING OFF PERIO
- NO CONDITIONS
- FEWER DAYS ON MARKET
- A VERY TRANSPARENT PROCESS
Both methods are valid methods of sale. Your choice will depend on which method
You feel most comfortable with. There is no right or wrong.
For all sales, you must specify the selling price that is acceptable to you in the sales agency agreement. However, before you sell at auction you will need to set a reserve price in writing, which authorises the auctioneer to sell the property to the highest bidder at that price, or greater.
The reserve price cannot be more than 110% of the price you stated in the sales agency agreement. For example, if your acceptable selling price is $400,000 then your reserve can be set at any amount up to $440,000, but not more. The agent must keep written records of the reserve.
You cannot increase your acceptable selling price in the sales agency agreement.
All bidders at the auction must be registered. Ultimately, the bidders determine the price they are prepared to pay for the property.
The agent must keep written records of all bids made throughout the auction.
It is an offence for any person to ‘dummy bid’. This includes procuring a dummy bid and an auctioneer knowingly taking a dummy bid.
While dummy bidding is prohibited, you are allowed up to three vendor bids at the auction. They must be announced by the auctioneer as a “vendor bid”, and they must be less than the reserve price. A vendor bid indicates that the bids haven’t yet reached your reserve.
If the property reaches the reserve price it will be sold to the highest bidder. Contract documents are normally signed and a deposit paid on the day of the auction. There is no cooling-off for anyone who buys a property at auction.
If bidding does not reach the reserve price, and you do not wish to lower the reserve price, there is no sale and the property is ‘passed in’. You may then choose to negotiate a sale with the highest bidder after the auction, or choose to place your home for sale on the open market.
If negotiations result in a sale contract on the same day as the auction, the contract is not subject to a cooling-off period.