How to choose your method of sale
Choosing how to sell your property can feel like a big decision. Here’s an overview of the methods available and the reasons they may work best for you.
We’ve all read the media commentary about rising house prices, and although there are many theories as to why this is, what it fundamentally comes down to are two factors – low supply and high demand. Currently, New Zealand is undoubtedly a high demand, low supply market, with fierce competition for properties – particularly in Auckland and Christchurch.
Auction is the best way of achieving a premium price in a competitive market. 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.
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 listing price. They set the terms, conditions and the deadline, and prospective buyers have only one opportunity to put forward their most competitive offer.
The seller doesn’t necessarily have to accept the highest price. They can choose to negotiate with any of the tenderers to achieve a satisfactory conclusion.
Price By Negotiation (PBN)
This method of sale can be applied in any of these three ways:
No price is advertised. Buyers make offers through the sales consultants.
A minimum price may be advertised. Offers above this minimum price are considered by the seller.
A price range may be advertised. Offers within this price band are considered.
The benefit of PBN is the level of market interest will help the seller gauge a fair sale price. The “no price” aspect will also attract more genuinely interested, cash-in-hand buyers. By contrast, unlike auction and tender there is no sale date or deadline in place so there is no urgency placed on buyers to make a buying decision.
This means that a property is listed with a definite price. If the property is priced correctly it will attract a lot of interest, and in some cases have multiple offers resulting in a premium sale price. The fixed price also gives the buyer a price guideline and allows for a property search by price on real estate websites.
However, it is easy to over- or under-price the property and buyers may discount the property without inspecting it, judging it solely on the price. This can effectively limit the market for that property.
DID YOU KNOW?
If, as a seller, you may receive pre-auction offers from interested prospective buyers.
If you wish to accept the pre-auction offer, in most cases your Harcourts sales consultant would recommend you bring forward the auction and contact any other interested parties. The brought forward auction can then be held with the initial acceptable offer as the opening bid. That way if any buyer is prepared to pay more, you won’t miss out on getting the best possible price.