Western Australia, unlike its brother and sister states in the east, is fixated on Private Treaty as a method of selling property. But why? In today’s information age, buyers hold the power. So why haven’t sellers and agents adjusted their approach to make it work for them?
Ask most Perth real estate agents which method they recommend when selling a property and the answer will almost always be “Private Treaty.” But does it necessarily deliver the best result?
Western Australian’s have always been hooked on Private Treaty while most other states in Australia have a more balanced approach with at least 50 per cent of suburban property being marketed without a fixed price, culminating in an auction or tender process.
The essential difference between these two approaches comes down to setting the price.
Using private treaty requires the seller to set a fixed price for the property and making that price public knowledge. This sale price is often based on their real estate agent’s recommendation.
In fact, sellers often mistakenly select an agent purely based on the price that the agent forecasts and agents are tempted to quote sellers a price they want to hear!
Alternatively, going to market without revealing a set price means the market place (i.e. buyers) bid for your property to the maximum price they are willing to pay.
The Real Estate Institute of Australia lists the differences between the two approaches however, important issues for a seller include:
Set Price
also known as Private Treaty or Open Market
• No set settlement period
• No set terms of sale
• Price that is attacked by buyers
• Buyer is in control
No Set Price
also known as Auction, Tender or Offers Invited
• Set settlement date
• No price barrier
• Set sale terms
• Seller in control
I believe Perth’s fixation on Private Treaty is based on an era when buyers didn’t have easy access to market information and real estate agents controlled that data. Today, buyers are very well informed and have access to ample market data. They are capable of making their own decisions about the value of a property. The no set price approach, especially when combined with the auction sale process, brings a concentrated and defined marketing campaign to a climatic conclusion where buyers are forced to offer their best price.
Agents need to let go and encourage sellers to ‘take the lid off’ and let the market decide. You want buyers to compete. The result may exceed expectations.
And sellers remember, even at an auction, you don’t have to sell unless the result is right for you.
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