When considering selling, it’s important to consider what the most appropriate sales method is for the area your property is located in. If most of the homes in your area are offered for private sale, there may be a good reason for this. Auctions may simply not achieve the desired result in your area. So do a bit of research before choosing the correct method for you.
Commonly there are 4 main sales methods:
Most estate agents will use this method, preparing descriptive details of the property and quoting a definitive asking price. Details are circulated, potential buyers may view the property and either agree to buy at the asking price or submit an offer to purchase. The price can be adjusted throughout the marketing stage, based on buyer feedback and local market conditions. Agreement to buy at this stage (for England and Wales) is subject to formal contracts being prepared between the vendor and the purchaser and those contracts being signed and exchanged between the two parties. If several interested parties are introduced to the seller those parties will be invited for “best & final offer” thus ensuring the vendor receives the optimum price.
The property is advertised for sale by auction, rather than at a fixed price. Those interested in buying attend a competitive auction, conducted by an auctioneer, where the person who bids highest buys the property. The successful bidder is legally bound to purchase when the Auctioneer’s hammer falls on his bid. They pay a 10% deposit there and then and has to complete the purchase on the stated completion date – normally 4 weeks after the auction date. The seller is protected by a reserve price. This means your property won’t sell unless bidding reaches a pre-agreed level. This is usually used for popular properties which are likely to have strong competition – so that it does not matter if some prospective buyers are not able to bid. This method is also most likely to appeal to cash buyers.
In this process the asking price will not be stated, though generally a guide price will be given. Written offers will be invited (known as sealed bids), and a closing date for such offers will be published. All offers are opened at the same time. Generally, the vendor is not committed to accepting the highest or any offer. The offer is not binding and on acceptance of any offer the transaction proceeds subject to contract. This is used if the property competition is strong and a choice of buyer is likely and when a closure date is required or desired.
When a formal tender is used in selling a property, the sale will be advertised with a deadline by which prospective purchasers must submit their bid (as with an informal tender). However, each tender document from the bidders must include the full legal contract for sale and all bids have to include a banker's draft as a deposit on the contract. The bids are opened by the vendor or agent. As soon as the “best bid” is selected, the banker's draft is accepted and contracts are automatically exchanged. The successful bidder is then committed to the contract and will have to complete the sale on the appointed date. If the successful bidder fails to complete the sale they will forfeit their deposit and further costs may be incurred. This is usually used with some land transfers but in property, it is rarely used due to its complexity.