If you sell your home during a property boom, you probably won't give too much thought to the way in which the sales price is established. That's because, during booms, houses generally sell for an amount sometimes significantly higher than what you paid for the property
When the market is flatter it pays to look at the different sale methods available to you to ensure you choose the one that best suits your needs and your property.
Auctions are an excellent method of achieving the maximum price for a property during periods of high demand. They bring multiple buyers into one room — thereby creating price competition –— and they create an atmosphere of urgency, which ensures that potential buyers put their best foot forward.
With an auction, the agent and seller will also generally agree on a reserve — a price below which the property can't be sold. So sellers are also protected from unusual results and still have the power to negotiate if necessary.
When markets are flat there can sometimes be big differences between buyer and seller expectations.
This method sets a fixed date by which all offers must be submitted. It's similar to an auction in that the reserve is confidential and the deadline, theoretically, puts pressure on buyers to make their best offer.
Offers are generally submitted to the office of the agent — but with a deadline treaty an offer can be accepted, and the property sold, before the deadline.
Otherwise, there's usually a period after the deadline has passed during which you can consider the offers and, if you wish, negotiate with a potential buyer. There is also no obligation to accept any of the offers.
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Tenders are similar to deadline treaties — except you can't accept an offer before the closing date.
Price by Negotiation (or PBN)
This is the sales technique where properties are marketed without any sort of price indication. The theory is that potential buyers will offer what they believe the property is actually worth, or, at least, worth to them. There's no deadline date with properties sold using PBN and you still have the ability to negotiate.
Fixed Price (or Advertised Price)
Fixed or advertised price sales are those where a price acceptable to the seller is stated in the advertising. This provides potential buyers with certainty and enables them to make an informed decision on whether the house is for them.
Reverse (or Reducing Price) Auction
This is really a novelty rather than a serious method of sale, but I'm including it for completeness and because there have been some recent high-profile examples.
In a reverse auction, the seller reduces the price of the home by a set amount each day until somebody buys it. This creates competition among buyers — and the potential buyer has to balance the desire to get a great deal with the risk of missing out if they wait too long.
Sometimes the seller has control over the minimum price they're prepared to accept — in other cases the price keeps dropping until a buyer is found.
Which of these methods is best? I guess that comes down to personal preference.
Talk to your agent about which technique he or she has found to be the most effective and ask for practical examples to help you decide.
• Ashley Church is the former CEO of the Property Institute of New Zealand and now writes on behalf of OneRoof.co.nz