Auctions vs private sales

When it comes to buying a property in Australia, you will come across 2 methods of sale: auctions and private sales. Here I will break down the differences including the benefits and drawbacks of each (although you don’t really have a choice as it is the agent/vendor who will decide what method they use).

Auctions can be a bit nerve-wracking. We’ve all seen those intense bidding wars on TV where people go wild for their dream homes. However, auctions don’t always end in a frenzy. In fact, some properties sell for less than expected or don’t even get any bids at all!

The key thing to note with Auctions is once you sign that contract, you are locked in. So, it is crucial to do your due diligence beforehand. Get your building inspection done, have the contract reviewed, sort out your pre-approval (and make sure its fully assessed), and be ready to bid with confidence. Yes, these are a sunk cost if you aren’t successful at Auction, but they are necessary.

The best part about auctions? Transparency! You can see who you are up against. There are also rules in place to keep things fair and ensure a level playing field for all parties. The primary focus of auctions is to secure the highest price for the property, and if you have done your due diligence, you can purchase that property without any regrets.

Private sales lack the predictability and standardised procedures found in auctions. Each agent has their own distinct process, resulting in a variable and uncertain experience. It can be likened to playing a game of “Guess the Offer” or “Let’s Make a Deal.” Questions arise regarding the disclosure of competing offers, the possibility of negotiation, and the potential presence of deceptive tactics.

There is a silver lining here though, because in private sales, you can have some conditions. For example, being subject to a building inspection or finance approval. Just keep in mind that too many conditions might weaken your offer, especially if there’s competition.

The downside? Less transparency. You won’t see the other buyers or know what they’re offering. It’s like trying to play poker blindfolded. You’ll need to ask the agent all the right questions to navigate this maze, and to make sure you don’t miss out on a purchase because you didn’t understand the process.

The Verdict: Auction or Private Sale?

The million-dollar question is: which one is better? If I HAD to choose, I’d go with auctions. They offer transparency and clear rules. However, the prevalence of auctions vs. private sales depends on where you are. Big cities and high-demand areas lean toward auctions, while regional spots tend to favour private sales. So, at the end of the day, you don’t really have a choice as to what sale method you’ll be faced with, but just remember that auctions aren’t always a chaotic roller coaster, so they certainly shouldn’t be avoided if it’s the right home for you.