Auction involves a short, sharp and intensive marketing campaign of a property without a price. This is to test the market to see what buyers, in a competitive situation, are prepared to pay to become the new owners of that property.
Marketing with a price limits what a keen buyer may pay. Once a listing price has been established for a property, a ceiling has been placed on what a buyer expects to pay for it. Auction, on the other hand, offers a real opportunity to get more for a property than the seller might expect.
There are three opportunities to sell a property using the auction method:
In the lead-up period high profile auction marketing will highlight the property, producing the greatest exposure during the period when enquiries are likely to be at the highest level.
The auction itself is the shortest part of the process but it is the best opportunity to sell during competitive bidding in an open arena.
Post-auction period - some people believe that if the property does not sell on the auction day then the auction system has failed. This is not true. Stage three provides opportunity to negotiate with those who may need to sell another property or arrange finance before they can commit themselves unconditionally.
This method of sale can be applied in any of these three ways:
No price is advertised, like an auction, but without an auction plan. Buyers make offers through the sales consultant, as in exclusive agencies.
A minimum price may be advertised. Offers above this minimum price are considered by the seller.
A price range may be advertised e.g. $170,000 -$195,000. Offers within this price band are considered by the seller.
The tender works in a similar way to the auction system, except there is no public auction day. Instead, tenders or offers close at a specific time on a specific date.
Tender presents another opportunity for sellers to create a competitive situation without stating a listed price. They set the terms, conditions and the deadline, and prospective buyers have only one opportunity to put forward their most competitive offer.
When sellers offer their property for sale by tender, everyone with an interest to purchase must put in their offer on a normal Sale & Purchase Agreement/Contract or a specially prepared tender document.
These offers are sealed in an envelope and deposited in a tender box, by a predetermined date and time.
All tenders are held by the consultant or someone appointed by the seller until the close-off date.
They are then opened together, allowing the seller to choose the most favourable offer.
A time frame is often given for those offers to be considered.