Dare I say it…Is private sale the way to go?
For the first time in more than two decades, I am starting to advocate the benefit of private sale. My new beliefs stem not just from my work as a professional valuer, but also from my occasional role as a vendor advocate (incidentally, an indispensable tool for any potential vendor).
Whether we like it or not, the global financial crisis is going to be around for a while, and the news is likely to keep worsening. So with that in mind, vendors take note!
It is true that auction results in Metro Melbourne have returned to over 70% clearance rates. However, let’s look at this within the context of an agent’s number of listings. So far this year, there is a significant dip –
400 properties compared to an average of 1,200 properties in the past three years.
At the time of writing, market feedback indicates that most properties for sale via public auction have been a disaster. That’s right - sold after auction.
In the current financial climate, the only benefit of a public auction is to make the real estate agent’s job easier. Agents in today’s fluctuating market are generally unsure about the value of individual properties.
They will quote an estimated value to secure the listing, and then allow the market to dictate the actual price – which is usually below their quoted sum.
Of course, all too often these days, the property is passed in at auction, and so a private sale is initiated. And after a failed auction, a private sale is utterly disadvantageous to the vendor. The urgency of the auction process has diminished, and most buyers believe that they will eventually purchase the property for a heavily discounted sum.
So how can a private sale work to the vendor’s advantage? Well, for one, it gives the vendor more control over the sales process, and encourages an honest line of communication from beginning to end of the campaign. An auction limits the communication to the ‘Thursday night meeting’ prior to the auction, and involves conditioning processes, which are frequently ineffective.
Yes, before my agent colleagues jump on my back, I’ll agree both auctions and private sales have their place in the real estate industry, with many benefits and disadvantages. The key however, in this market, is to consider each property within the context of its market position and the wider financial climate. Most importantly vendors, choose the right agent for the job, one who can sell regardless of the process. More likely than not, in this current market, it will be sold by private treaty anyway.
Property Rules of engagement according to FVG
- Place a value on your property after seeking recommendations from buyer’s advocates, property valuers and agents, and from your own market observations.
- Test the market in an orderly fashion. Don’t make rash decisions based on personal or vested interests.
- Choose a strong agent – one who knows how to sell and has an excellent track record in your area – and expect them to support the result they are quoting.
- Minimise advertising costs. Advertising in a down market benefits the agent, not the vendor. Buyers will do their research and make it their business to know every property in the area. Furthermore, a good real estate agent should have potential buyers on their books anyway.
