On the Northern Beaches of Sydney, three property sales strategies seem to be used most often by real estate agents – auction, private treaty and off-market. For buyers, successfully securing a property will depend on the selling strategy at play.
In this episode of the 26 and Sunny podcast, co-host Nick Freeman takes us through the ins and outs of selling strategies. A buyer’s agent on the Beaches, Nick has a wealth of knowledge and experience to share.
Find out what's involved and how to navigate each one successfully as you look for property on the Beaches.
Nick Freeman, AddVantage Property
When someone decides to sell their home, the agent will give them the option of auction, private treaty or off market. Can you briefly explain what each of these means?
Sure, let's start with "private treaty". This is a method where the seller – also known as the vendor – sits down with the selling agent and sets the price they would like to achieve for their property. The property is then advertised publicly, and potential purchasers are allowed to view the property, conduct their due diligence, and make offers.
Private treaty usually comes with the opportunity to negotiate the price and terms of the purchase. It often allows for a cooling-off period in case the purchaser needs to withdraw from the purchase.
An "auction" is where the vendor and selling agent set a price range that the vendor is willing to accept. Legally, this range or price guide should be set in the middle of a 10% difference of the agreed sale price. For example, if the agreed sale price is $2 million, then the agreed range will $1,900,000 to $2,100,000.
The property is advertised publicly, and potential purchasers get an opportunity to view it and conduct their due diligence. A date is then set where all potential purchasers meet and enter into a bidding war. Once the bidding has come to an end and the vendor is satisfied with the amount on offer, the property is deemed sold. Under these conditions, there is no cooling-off period, and the purchaser is obligated to complete the transaction.
An "off-market campaign" is where the property isn't advertised or marketed publicly. Usually, the vendor will instruct the agent to reach out to their database or associates to see if the property they have listed would be of interest to a select group of purchasers or contacts.
Why do people use off-market strategies?
Discretion is often a key factor. Depending on the client, they may want to keep their financial or home life private. They may not want potentially hundreds of people a week looking through their home.
Another reason is that it can reduce pressure on the vendor. If a property enters a public campaign and is passed in at auction, or it sits on websites for a long time in a private treaty campaign, the property may develop a bit of a stigma, possibly detracting from its true value. Some sellers don't want to be exposed to that pressure and would rather the sale happen out of the public eye.
Finally, off-market sales can happen very quickly. Sometimes, the potential purchasers are already qualified due to the nature of the selling agent's database or the buyers' agents coming through the property.
How do people find out about off-market sales?
The best and easiest way is to enlist the services of a buyer's agent who has a good market presence. It's essential to choose a buyer's agent who is based geographically close to the primary suburbs of interest. This way, the agent can stay abreast of everything that's going on around the suburbs and alert the potential purchaser when a suitable off-market property becomes available.
Another way is to attend open houses of homes that are similar to what you're looking for. By registering at the open house, you can get on the agent's database and wait for a phone call from the agent if something comes up. Unfortunately, once you're on a selling agent's database, you're likely to receive a litany of all other listings, information, and marketing that you may not be interested in or have the time to sift through.
What type of selling strategy is currently being favoured by vendors on the Northern Beaches?
In 2023, the preferred selling strategy varies depending on the sector of the market.
In the top end of the market, many transactions take place off-market with little or no public knowledge.
When it comes to auction, according to Domain, as of this week there are 595 publicly advertised properties for sale on the Beaches, with only 195 of those properties mentioning an auction campaign. This data suggests that about one-third of properties are for sale by auction.
My experience is that the type of property determines the preferred selling strategy. For example, a family-suitable 3-to-4-bedroom home on the Beaches with an affordable price point would likely have a much higher auction campaign ratio as there are more buyers in that market for this type of property.
Recently, the majority of listings for entry-level homes on the beaches have started as auction campaigns.
Can you buy a home offered for sale by auction before the auction day?
In some cases, yes, but it depends on various factors that can influence the auction campaign and the vendor's decision.
For instance, if the real estate market is volatile or the property has been on the market for a while, the vendor may be more inclined to consider an offer before the auction. Conversely, if the property is a deceased estate or has multiple beneficiaries, the auction may be preferred to ensure transparency and fairness. Timing can also play a role, as the vendor may have a deadline or a desire to move on to another property.
If you are interested in buying a property before auction, it's important to communicate with the selling agent and gauge their receptiveness to the idea. One tip is to monitor the level of interest in the property and assess whether the vendor is likely to achieve a satisfactory result at auction or may consider a pre-auction offer. However, be mindful that the selling agent's duty is to obtain the best possible price for the vendor, so they may not disclose all the offers or counteroffers that they receive. Therefore, it's advisable to seek independent advice and conduct due diligence before making an offer.
Any final tips for buyers?
If you're planning to buy a property on your own without a buyer’s agent, be sure to invest your time and effort in researching the areas you're interested in.
If you find a property you like, spend some time observing how many people enter and leave the property, what their level of interest is and the sort of questions they’re asking. Stay for a while, listen to conversations, and try to get a better understanding of where the property stands in the market.
Sometimes, the information provided by the agent may not match the reality, so it's essential to build your own view. Professionals in the industry spend their time assessing and analyzing properties to provide the best advice to their clients. Therefore, if you want to buy a property on your own, it's essential to gain a thorough understanding of the property market.
Want to get in touch with Nick? Head to www.addvantageproperty.com.au