Auctions or private treaty – what suits your buying needs best?
Over a quarter of homes go to auction in Australia, but this doesn't mean buying at auction is right for everyone. We thought we'd weigh up the advantages and disadvantages of purchasing both at auction and via private treaty, to give you an idea of what will best suit your Gold Coast real estate needs.
Buying at auction
1. Quicker – With an auction, the seller will set a date and the house will be gone, often within a month. Once you've bought your Gold Coast property, you get to move in pretty much immediately. This is a good option if you've already sold your current house and therefore have a time limit for when you will have to move out, or if you don't want to spend a long time looking.
2. Properties are sold for fair market value – On the open market, a property's value is decided by real estate agents. They take a number of factors into account, including the current supply and demand and what other properties in the community are selling for. Often, these factors aren't that transparent. At auction, on the other hand, buyers decide what the house is worth for themselves.
3. More opportunity – A lot of homes go to auction that need improvement or may have the potential for conversion work. So, if you're looking for an investment property, auction is a great option, as you may be able to develop the house to a much higher value than the price you bought it for.
4. Fair chance – With private treaty, there is often more of a first-come, first-served attitude than at auction, where everyone has an opportunity to place their bids. You also know exactly what your competitors are bidding at auctions, so you only have to offer a price that's slightly higher than theirs, instead of massively over-bidding so you don't miss out.
Buying by private treaty
1. You have more time – After successfully winning a bid by private treaty, you normally have a set period of time to make thorough inspections. This means you will know exactly how much work the property may need to undergo. You can also review all the documentation in detail, so you won't be landed with any unforeseen back property tax payments or other extra charges.
2. Better for inexperienced buyers – Auctions often attract seasoned real estate investors who know what they're doing. This is often because with auctions, you have to do all the research yourself, whereas your agent will normally do all this for listings. So, if you aren't as experienced, and want more time to consider, or won't like the pressured environment of an auction, you might do better with private treaty.
3. Easier to budget for – With an auction, it's easy to get carried away and accidentally end up offering more than you can afford. This is something that is especially dangerous as you can't go back on your offer in an auction. With private treaty, the seller gives their desired asking price, so you know immediately whether it's in your range. You also have longer to withdraw your offer if you find your finances aren't what you thought they were. Likewise, you need a deposit cheque and pre-approved financing upfront with an auction, something many people do not always have access to.
Different buying methods suit different people. At Ray White Surfer's Paradise, we deal with both private treaty and auctions. For more information, please contact us on (07) 5538 1555.