Arm yourself with some essential buying skills for purchasing a property via auction or private sale.
“It’s important to know how each process works and how that could affect the outcome.”
— Joe Gardiner
Both private sale and auction have positive and negative points from a buying perspective.
Once you’ve found your dream home, keep these points in mind when purchasing under either situation.
By global standards, Melbourne and Sydney are auction hotspots, with many homes being sold under the hammer year-round in these key Australian cities.
Buying at Auction
Purchasing a property at auction involves bidding against other parties, and the competition can get fierce.
For this reason, purchasing at auction is often preferred by experienced or confident buyers. Less experienced or first time buyers can purchase at auction too with the right approach.
Pros of Auctions
- Transparency – Buying a home at auction allows you to see your competition face-to-face, and get an idea of how many other parties are interested in the property.
- Immediacy – It also gives you the chance to make a higher offer than a competing buyer, something a private sale doesn’t always give you the scope to do.
- Gratification and thrill – Moreover, there’s the advantage of knowing the property is yours there and then, rather than having to spend weeks or months in negotiation.
Cons of Auctions
- One of the disadvantages of buying at auction is the limited scope to negotiate the terms and conditions of the sale contract.
- The other possible downfall is the tendency for competition to drive up the purchase price.
- Can be intimidating or overwhelming if you are a reserved person, as there is a lot on the line!
- After a final bid is accepted, there is no cooling-off period – you must put the deposit down immediately (think bank cheque with a blank amount, or an electronic direct deposit…not PayPal!)
- Know when to fold ’em: Be careful that you don’t get tempted in the heat of the moment into making a bid that’s beyond what you can afford (or have budgeted) to spend.
Buying via Private Sale
A private sale is popular from a buyer’s perspective for several reasons, but top of the list would have to be the control and flexibility it can offer.
Note: Terms and conditions of this buying method may vary according to state.
Pros of the Private Sale process
- Prime position: A private sale can put a buyer in a better position to negotiate more flexible price, settlement timeline, conditions and terms with the vendors (the sellers).
- You may be able to make several offers over a period of time, without rushing or being locked into a binding contract.
- There is often a cooling-off period after your offer has been accepted which also gives you the chance to pull out of the sale should you change your mind.
Cons of the Private Sale process
- Auctions tend to be the method of sale on the most desirable properties. Therefore, if you are looking to high demand areas, at a peak in the market many houses will be using the auction method.
- On the flipside, one of the downsides of a private sale is the possibility that multiple offers may be made to the vendor without your knowledge.
- This can work against you if another party makes a higher offer that is accepted by the vendor when you might have been willing to make a similar offer eventually.