In New South Wales there are three main methods to sell your home: Private Treaty, Auction and Expressions of Interest. In this article we will explore the benefits and down fall of each method and how to go about choosing the best method to sell your home.
Selling homes is much like any other product. The more demand the greater the price.
Effective marketing campaigns to generate as much buyer interest as possible is paramount in any sales method. The more buyers that know your home is for sale, the greater interest, greater demand and therefore greater opportunity for maximum sale price.
Selling by Private Treaty
Private Treaty is the most common method of sale used by Hunter Valley Real Estate Agents. A real estate agent will work with you provide a price range that they believe you home will sell for, typically providing a Comparative Market Analysis (CMA) for the homeowners consideration which shows recent nearby sales. The home is then advertised for a set price or a price range. If a price range is used, then the range cannot exceed 10%. An example of a valid price range would be: $600,000 to $660,0000.
Potential purchasers will inspect your home either through open homes or private inspections, with the method of showing your home determined by the Hunter Valley real estate agent that you've selected along with your personal preference for how you would like your hoem to be shown.
Offers may be made at anytime during the marketing process. The price range you set with your agent is an agreed amount that you have agreed to consider offers within. However, even if a potential purchaser makes an offer within the range, you are not legally bound to accept it.
NSW legislation states that offers can be made verbally or in writing (be careful of any agent that says you must submit offers in writing, through a website or app - this is not correct and it's important that agents understand and abide by the law).
After an offer has been accepted by the seller, the purchaser can choose to pay a 0.25% deposit of the total sale price deposit and sign the contract, they then enter into a ‘cooling-off’ period. The cooling off period is 5 full business days. During this time purchasers can arrange pest and building inspections, valuers, and have time to consider if they would like to proceed with the purchase. If a purchaser decides not to proceed, they will forfeit their 0.25% and this money will be paid to the vendor. If the purchaser determines they would like to proceed or they fail to notify that they do not wish to proceed within the cooling off period the sales contract is binding and the sale will proceed. During the cooling off period an agent is not permitted to show the home or enter into negotiation with other purchasers.
There is no obligation on a purchaser to sign a contract and pay the 0.25% deposit while completing their due diligence, however this means that the home can still be marketed and other purchasers can make offers. If you accept a higher offer from another purchaser the original purchaser is ‘gazumped’.
Selling by Auction
If you choose to send your home to auction you will work with your agent to set a date and time for the auction. Auctions can be held at the property itself or some auctions are held offsite, commonly at the office of the real estate agent or an alternative venue such as a local function centre.
Marketing for the home will usually commence 4-6 weeks before the scheduled auction date. This will allow time to generate interest from potential buyers and allow buyers to complete their due diligence on the home (pest and building reports, valuers and approval, access to deposit for the auction day and final approval for a mortgage, if required). The sense of urgency can create a buzz and ensure people do not want to miss out.
The agent will work with you to set a reserve price, the price that you are willing to sell your home for. Once the hammer falls, a 10% deposit must be paid and the contracts must be signed. There is no cooling off period when purchasing a home at auction. Settlement is determined by the date specified on the contract of sale and will usually be between 4 and 12 weeks after exchange of contracts.
While there are some houses in this area that will generate intense interest and benefit from auction, this method of sale is not for everyone. In the Hunter Valley there is a very high percentage of failure rate for auctions. This means that the reserve is not met and the home is ‘passed in’. The marketing campaign and the licenced auctioneer engaged to sell your home can often involve significant cost and if the property is passed in there is rarely a refund for money invested. If the property does not sell the real estate agent can work with you to set another auction date, or move to another method of sale.
Expressions of Interest
Expressions of Interest are often accompanied with a closing date. Sometimes described as a silent auction, purchasers are invited to place offers on a property, without knowing what other potential purchaserss are offering.
Purchashers are encouraged to place their best offer in order to try and secure the property. The real estate agent must not disclose what other purchashers are offering. This information can only be shared with the vendor.
Purchashers are encouraged to make their offer in writing and include any specifications or requests such as requested settlement dates, finances and if they would like any additions or exclusions in the contract. After the closing date, the vendor is presented with any offers for consideration. The vendor is under no obligation to accept any offers utilising this method of sale. If no suitable offers have been made during the expressions of interest campaign the real estate agent can extend the period for with EOI will be accepted or move to another method of sale.
In terms of the Hunter Valley market, selling by private treaty is by far the most common method of sale.