Allianz Home Insurance


Buying a house: Auction Vs. Private sale – Part 1

by Chris Lang on May 30, 2007

When you’ve decided you’re ready to buy a house, it means that one big decision is made and you’re now in Buyers Land – a totally new territory where you have so much to learn. One of those new things is the way people sell houses – by private sale or an auction.

I wasn’t that familiar with the property auctions before I came to Australia, this is why I had to do some research about that and this is what I have found.

Auction – what’s it all about

House is being advertised by estate agents in newspapers, they prepare brochures with photos of the house and its floor plan, and they put a signboard near the house to advertise it and to make easier for interested buyers to locate it.

Seller sets “reserve price”, which means that he won’t sell for anything lower than that during the auction. The date of auction and inspections are advertised in newspapers and on the signboard. All of the inspections and check-ups have to be done before the auction day.

Many sellers like auctions better because they know that in 6 weeks (the time house is advertised before the auction.) they are likely to sell it. It also means that they have to keep the house spotless and in perfect condition (in case people want to inspect it) for only 6 weeks instead of unknown period of time.

On the date of auction all interested buyers come at specified time and they begin placing bids on the house – in other words everyone says what they want to pay for it. Highest bidder gets the house and must pay the deposit (10%) the same day.

It could happen that in the auction every buyer would bid below the reserve price. In that case the house is not sold, but it is quite possible that the owner will contact the highest bidder for further price negotiation.

The bad points of auction in buyer’s eyes are:

• There are no limits on the price, so it can get rather high

• All of the check-ups buyer does to make sure nothing’s wrong with the house cost him money with no guarantee he will win the action

• The deposit successful bidder has to pay is non refundable

• The contract buyer sign is unconditional, which means that even if your loan wasn’t approved by the bank you still have to buy the house or loose your deposit

• Buyer may be busy somewhere else on the day of auction

• Each buyer competes with other buyers and it drives the house price up. In private sale buyer competes with the seller – and it drives the price down

• The pressure buyer feels when he has to compete with other buyers

But even if you see a house advertised as being for sale by auction, you can still avoid it – go to the agency and make your offer. In many cases the seller will agree or you’ll have a chance to negotiate the price.

Some reasons for seller to accept your offer would be:

• Auctions cost a fair bit of money – for example if the reserved price is 450,000 an auction can cost 4500, which seller can save by accepting your offer

• Sometimes the seller is in a hurry and needs a quick sale

• No one knows how many people will turn up during the auction and what they will offer for the house, so seller might prefer to take your offer rather than take a chance on auction.

To be continued…

{ 5 comments… read them below or add one }

sell your house quickly January 24, 2010 at 7:53 pm

In addition, an inspection sends a signal to buyers that you are professional, trustworthy and prepared to close the deal quickly.


Sell House Quickly January 26, 2010 at 2:08 pm

Consider increasing commission by a half point to the buyer’s agent. An extra half percent commission will only cost you $1000 on a $200,000 property. That’s a bargain if it helps get the house sold months faster.


Chris January 26, 2010 at 3:56 pm

‘Months’ faster? Properties are going here in days 🙂


Princetown at the Landings October 15, 2011 at 8:42 pm

I guess the faster deal and the bigger commission the better. The sellers really benefit a lot during the auctions.


buyer agent sydney January 29, 2016 at 10:55 pm

And the fact is For sale By Owner property saves you thousands.
If you don’t ask your current clients to recommend you to their
friends or to refer their friends to you for follow-up, you’re really missing out on a huge
opportunity to reach potential prospects. in a market that
is in decline your Buyers Advocate can be
a great resource to help the sellers agent and the seller get real about the sales price.


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