Pros and cons of auction

Pros And Cons of Selling A Property through an Auction

In the Melbourne real estate market, there has always been a debate about selling by auction or private sell. While auctions are considered long since to be a great way to get the highest price for the property because of the competitive atmosphere, many others think that private sale is the best option. Before you consider auction, it is best to think about every aspect. Given below are a few pros and cons from McDonald Real Estate to help you make an informed decision.

The Pros

  • Auctions are successful because they create a sense of urgency. There is an end date set for the property sale and this usually compels the potential buyers to quickly make a decision.
  • Auctions have competitive bidding among the potential buyers. This develops a competitive atmosphere which means that the sale price is often higher than the property’s expected value. For sellers, this maximizes the property sale price.
  • With an auction, sellers get protection through the reserve price. What this means is that the property cannot be sold unless the bidding reaches the agreed level of price. There are no ceiling prices in the auction so sellers can maximize the sale price. Auctions therefore successfully make the most of the competitive nature of the buyers.
  • When the owner prefers unconditional sales, an auction is the best possible option because there is no cooling off. It is also great for sellers who prefer certain sale terms like settlement terms.

The Cons

  • Selling a property through an auction has several benefits but it also includes additional costs. These costs are required to cover the fees of the auctioneer. For sellers, it is very important to compare and discuss all the costs of selling through a private sale or an auction with an experienced real estate agent.
  • In case of properties where there is accurate and ample sales evidence available, a private sale may be better than an auction. This is particularly the case with a large block of units that are identical in nature and specification. In such a case, the price of units would be known to buyers and private sale would normally provide better results compared to auctions.
  • Auctions are generally not suitable for buyers that are interested in purchasing a property dependent on finance since bids are meant to be unconditional.