Auction or Tender? By Negotiation or Fixed Price?
Every property sales agent has their favourite marketing method. There are also preferred methods within companies and franchises as is evident this week with a stoush between two big real estate players in the property section of the New Zealand Herald.
But how do you decide which method is right for you?
If we are to generalize, there are two main streams you can follow when selling a property. These streams can be succinctly summarized using the following words – “price” and “no price“. To easy!
Under the price stream we have the likes of fixed figure, Buyer Enquiry Over (or Buyer Budget Over), and any price range styles of marketing (which have fallen into disfavour in NZ currently). In the other stream we have Auction, Tender, By Negotiation, Private Treaty etc.
Which way to go?
In considering the following questions with your property in mind, hopefully the answer will become clearer.
To start though, it is profitable to dismiss the preconceptions and bias that you will have regarding certain methods of sale. Steady your nerves to consider such words as Tender and Auction with an objective eye.
Now to the questions…
In the current market conditions, who holds the balance of power?
To get an indication of whether it is a buyers or sellers market, ask your an experienced and active local agent what the average time to sell a home in your area is. Ask the agent whether prices are firming or weakening. Is there a build up of homes on the market or is demand outstripping supply?
What appears to be the predominant method of selling real estate in your area?
I pose this question because it will guide you as to what is potentially working, and what buyers are expecting. There is no point committing to an Auction if there are few or no auctions being undertaken on the area. The buyers will have no idea how to act in an auction situation and will turn up in droves on auction day out of curiosity and to learn but not to buy. In some areas (and countries), there is a good history of Auctions or Tenders, and this will make it easier to get bites on the deadline day if you pursue one of these avenues of sale.
Is your home unique and distinctive compared to homes in the surrounding area?
Of course every home is unique, don’t get me wrong, but I am looking for true characteristics that separate your property from your neighbours. These characteristics can be either good or bad, and it pays to try and step back and consider your home objectively if possible. Does your home have a pool and spa area which your neighbours don’t? Is your home a character property? Is it brand new in an area that is predominantly older housing? Does it come with more land than your neighbours? Is your next door neighbour a power pylon, school, playcentre, or park? Does your home have expansive sea views?
True uniqueness in a property adds value uncertainty. Buyers and agents aren’t cannot easily gauge market value. Value in this situation, especially if the uniqueness is positive, can be more subjective and emotive. Each buyer will have to fight with their own desire quotient (like that phrase? I just made it up) when deciding how much the home is worth to them. In this scenario, an auction or tender method may be the way to go to extract the best that the market has to give. The winner on the day will be the buyer who wants the house more than the others.
If your home is very similar to your neighbours then pricing will be easier and buyers will have a good feel for value when they walk in the door because there will be other similar homes on the market and recently sold that they can compare with. A fixed price or Buyer Enquiry Over style of marketing may work best for you.
How motivated are you to sell your home?
You may wonder what this has to do with the price of fish (or more accurately, with the price of your house). How does my motivation affect the the preferred marketing method of my house?
Motivation to sell has underlying causes. Do you have time constraints? Is there money or family pressure? Illness? Domestic stress? Major lifestyle changes imminent that require the sale of your home?
It is NEVER good being in a position of HAVING to sell. But if you find yourself in this situation an Auction or Tender may be right for you. Having a set marketing period with a distinct deadline can help mitigate some of the life stress and allow forward planning. When the final selling price is not the biggest issue, a tender or auction will get the house sold on the designated day and alleviate the stress.
Does the situation surrounding the sale of your home demand privacy?
When there is a separation going on, a death or major illness in the family, or sellers that need a buffer from the market, and privacy and time to make a decision, then I have found the Tender method of marketing can be great. As an example, I used this method when selling my own grandmothers home. She was moved to an aged care home with Alzheimers, her home had been in the family for 50 years, and my father and his sister had to sell the house to pay for her care. They were both in different parts of the country and had different opinions on the value of the property. It was advantageous in this scenario to put the home to Tender. On the deadline day there were 4 offers with a variety of conditions, prices, and settlement dates. The Tender method allowed the two children of the owner to discuss the offers, come to grips with selling in the first place, deal with the emotion surrounding the sale, and make a unanimous decision without feeling like they were put on the spot.
To summarize…
If you are considering selling, take the time to think about how you want to sell it. Do a bit of homework and spend some QTT (Quality Thinking Time) weighing the pros and cons. The estate agents you talk to will all have an opinion. Keep an open mind and value what they have to say as experienced professionals in their field but if you don’t feel right about selling using a certain method, step back, rethink it all and try to be objective. Then make a call.
As an aside, I wouldn’t necessarily choose an agent because of the marketing method that they are promoting. Any experienced agent should be comfortable with all methods of marketing in vogue in your locale. If you like an agent but don’t like the marketing method they have suggested, talk it through with them. Ask them if they are comfortable and experienced with these methods, and if the agent is adamant, attempt to understand why. A good agent will be thinking about your home and your situation primarily, they will have very valid reasons why they are promoting certain methods.
