Auctions trump off-market sales on price

Auctions trump off-market sales on price

ANYONE looking to sell their home faces the quandary of how exactly to do it.

Auction, private treaty or expressions of interest are just some of the options, but knowing which one is going to serve you best can be tricky.

There are many things you need to consider, not least the type of market you are selling in.

There’s no doubt that we’re in a sellers’ market.

Low stock levels comparative to demand has driven up national house prices by 22 per cent, a rate only surpassed twice before in the country’s history; in the 1950s, following the end of the war, and the 1980s, where the rapid price growth culminated in the financial crisis.

This discrepancy between supply and demand has led to a lot of off-market sales, where agents or buyers agents will try to negotiate deals with homeowners not openly on the market.

Off-market sales have always been around, but not at the prevalence of the past 12 months, and there have been some crackers, including two on Hedges Avenue for $7m and $15.6m.

Having someone approach you with the chance, essentially, to name your price without having to go through the hassle of open homes or the stress of an auction is no doubt appealing.

Yet some recent research has shown that doing an off-market deal instead of taking a property to auction when demand is buoyant, may not be in a seller’s best interest.

A report from PropTrack, which analysed sale prices of houses that were sold off-market compared to those that were listed on, found that on average they went for 2.6 per cent less.

Economist Paul Ryan and author of the report, said vendors needed to be aware that a decision to sell off-market could come at a significant cost.

“People chose to this route for a variety of reasons, including testing interest in their homes without incurring agency fees,” he said.

“Some sellers might be trying to save money by not advertising online, yet the potential earnings lost in the final sale price are estimate, on average, to far outweigh the initial cost of advertising.

“Sellers and agents want to achieve the highest sale price possible, and we know that creating competition is the best way to accomplish that. The evidence shows advertising online draws a bigger audience, increased competition and a larger sale price.”

The report also highlighted that the cost of choosing not to market your home can vary from location to location, with areas where the median house price is between $250,000 and $500,000 performing the worst. In these locations off-market sales achieved up to 3.7 per cent lower sale prices.

You might be thinking, what’s 2.7 per cent in the grand scheme of things.

It doesn’t sound like much, but apply it to, say the $15.7m Hedges Ave sale, and you’re talking about an extra $400,000 in your pocket.

Even at the more modest median house price, which REA puts at $830,000, you’re looking at gaining almost $22,000 by taking your property to market.

At either end of the scale, they’re not numbers to be sneezed at and while maximising returns may not always be top of a seller’s agenda, no one really wants to think they may have sold themselves short.

Written by: Lisa Hughes, Gold Coast Bulletin
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