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05 January 2010

Auctions - Good or Bad - Let's take a look!

Firstly, a little "Property 101" - If you're about to sell your property, you have too main methods:
1/ Private Treaty (typical contract negotiaion approach)
2/ Auction

If you're selling, you've probably toyed with the idea of going to auction. You'll find some agents recommend against auctions, while others swear by them and push all their properties into an auction.

I think there's a less black-and-white approach to deciding whether you should take your property to auction. We'll briefly look at the pros and cons of auctions, so you can decide what's best for YOU.

- Potential buyers bid against each other to get the best price
- You can set your own conditions - Buyers can't set conditions
- Contract has no cooling off period
- Encourages buyers to act

- The reserve price may not be reached
- Advertising costs are high
- Potential buyers only include those capable of bidding (cash buyers)
- Discourages private treaty offers prior to auction (due to no list price and buyers lacking confidence in making a bid)
- It may reveal a lack of interest (particularly if most interest is from buyers needing finance conditions in a contract), which can make post-auction negotiations a little more difficult.

Whether an auction suits you really depends on two key elements:
1/ You
2/ The property

- As the seller, you need to be comfortable with the pressure you're likely to experience during the auction (and 'yes', you will feel under pressure on the day). If you think the pressure may force you below your price threshold, perhaps it's not for you.
- An auction takes a few weeks to generate some interest and allow potential buyers to inspect the property (a few times) and be prepared to bid at auction. If you need to sell your property quickly (within days), auctions will definintely not work for you.

Your property
The following are when a property is better suited for auction. The property:
- has development potential
- is in the inner city area
- is unique (making it difficult to establish a market value)
- is a commercial property

In the end, it's up to you to weight these up and decide for yourself. If you would our opinion, feel free to call and talk to us about your property. It won't cost you a cent and we'll happily help you out - 1300 911 576.

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