18 Aug Pros and Cons of Private Treaty
The vast majority of property sales in Australia occur through a private treaty. What that means is that a vendor will put their property up for sale and then assess offers from buyers. If two parties can reach an agreement, a deal is struck.
While we also see many properties sold by auction in Melbourne or even more modern processes such as Openn Negotiation, private treaty is still, and always will be, the most common way to sell a property.
Advantages of Private Treaty
Attract Genuine Buyers
One of the issues with buying at auction is that many people are lured in by a less-than-realistic price guide, which is normally well under where a property might sell.
When you put an asking price on your property, you will attract genuine buyers.
You can further filter out genuine buyers by making people apply to find out the price of the property.
You Have Greater Control of the Process
In contrast to using an auction, if you sell by private treaty, you have more control of the sales process.
Under an auction, the vendor generally sets the terms of the sale and buyers must accept those terms. This can be a good thing, but it can also mean you miss out on a number of potential bidders.
For example, many buyers will be happy to pay a higher price for flexibility around terms. A development site is a good example of this.
Similarly, many buyers don’t want to go through the auction process as they are uncomfortable with it and will only buy through private treaty.
The slower sales process also allows the sales agent to do their job better by both seeking out the true market value of the property and attempting to attract more buyers.
Lower Marketing Costs
Generally, the costs of marketing a property are lower for a private treaty sale, but that is not always the case.
Given that each property is unique, they need to be marketed accordingly. It is possible to have no marketing costs at all if you sell your property off-market, which is really just a private treaty sale.
Disadvantages of Private Treaty
Longer Sales Time
With an auction, you have a fixed end sale date, which means that the process has a clear start and finish.
Under a private treaty, the negotiation can drag on for a long time. There are ways to avoid this, however, and some sales agents will utilise a process where all offers must be submitted by a fixed date.
The other issue with having no end date is that a listing can go stale if it doesn’t attract interest early on.
Possibility of Selling for Less than the Asking Price
In reality, many properties do sell for less than the asking price. However, it’s important to note that the sales agent is likely to factor that into the price.
Even if you sell by auction, if you only have one genuine bidder, you are not going to get a price well above the fair market value of the property.
At the end of the day, regardless of the way you sell a property, you need multiple parties interested to get a strong result. Much of that will come down to the property itself and its location, along with the ability of the sales agent to generate interest.
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