Private sale vs auction: which is best for you?
Deciding to put your home on the market is a big step. The next important decision is how you are going to sell it.
In New Zealand, common methods of sale include an advertised price, sale by negotiation, deadline sale, tender and auction. The right approach will depend on your property, local buyer demand, current market conditions and how quickly you want to sell.
Each method has advantages and potential drawbacks. Before making a decision, it pays to research recent sales in your area and speak with an experienced local real estate agent.
What is the difference between an auction and a private sale?
Understanding how each method works can help you move forward with confidence.
For this article, “private sale” refers to methods where buyers submit offers privately rather than bidding publicly at an auction. In New Zealand, this commonly includes sale by negotiation or an advertised price.
Selling privately or by negotiation
When a property is sold by negotiation, it may be marketed with or without an indicative price. Buyers submit written offers using a sale and purchase agreement, and the seller can accept, reject or negotiate the price and terms.
Offers may include conditions such as:
- Finance approval
- A satisfactory building inspection
- A review of the property title
- A Land Information Memorandum (LIM) report
- The sale of another property
- Approval by the buyer’s lawyer or conveyancer
The seller and buyer may exchange counter-offers until they agree on the price, conditions, deposit and settlement date.
This method offers flexibility because an acceptable offer can be made and accepted at any point during the campaign.
Selling at auction
An auction campaign usually has a set date, giving buyers a clear deadline by which to complete their due diligence and prepare to bid.
Before auction day, interested buyers should organise their finances, have the auction documents reviewed by their lawyer or conveyancer, and complete any inspections or other investigations. Because an auction purchase is normally unconditional, buyers need to be satisfied with the property before bidding.
The seller sets a reserve price, which is the minimum price they are prepared to accept. Once bidding reaches or exceeds the reserve, the property can be sold to the highest bidder.
If the property does not reach its reserve, it may be passed in. The agent can then negotiate with interested buyers, often beginning with the highest bidder.
Pros and cons of selling at auction
An auction is a public and transparent method of sale. Buyers can see the level of competition and decide how much they are prepared to pay.
A key advantage is the deadline. Buyers know when the property is intended to sell, which can create urgency and encourage serious purchasers to act.
An auction campaign may give the seller three opportunities to secure a sale:
- Before the auction
- Under the hammer on auction day
- Through negotiation after the auction
The seller may choose to accept an attractive pre-auction offer. Alternatively, if there appears to be strong competition, they may decide to continue to auction day.
When bidding reaches the reserve and the auctioneer’s hammer falls, the successful bid creates an unconditional sale. This provides the seller with greater certainty than an agreement containing buyer conditions.
However, auctions are not suitable for every property or market.
Buyers who need more time to arrange finance or sell another home may not be in a position to bid unconditionally. This could reduce the potential pool of purchasers. An auction campaign may also involve an auctioneer’s fee and require a concentrated marketing campaign to generate enough interest before auction day.
There is also no guarantee that competitive bidding will develop or that the reserve will be reached.
Auction advantages
- Creates a clear deadline for buyers
- Can encourage competition
- Provides transparency on auction day
- Produces an unconditional sale when sold under the hammer
- Allows the property to be sold before, during or after the auction
- Avoids lengthy private negotiations when bidding is strong
Auction considerations
- Buyers usually need to bid unconditionally
- Some buyers may be unable or unwilling to participate
- Additional auction and marketing costs may apply
- The property could be passed in
- The result depends on attracting enough qualified bidders
Pros and cons of selling privately
Many New Zealand buyers are familiar with advertised-price and by-negotiation sales. They may feel more comfortable making a private offer, particularly if they need to include conditions.
A private sale also gives the seller and their agent flexibility. They can consider not only the price offered but also the buyer’s conditions, deposit, settlement date and other terms.
If an advertised price is used, buyers have a clearer understanding of the seller’s expectations. However, setting the price too high may reduce enquiry and cause the property to remain on the market for longer.
With a sale by negotiation, the agent can speak privately with interested buyers and encourage them to submit their strongest offer. The seller can negotiate with a buyer or compare multiple offers if more than one is received.
The main drawback is the lack of a firm deadline. Without urgency, some buyers may delay making an offer. A prolonged campaign can also cause a property to lose momentum, particularly if buyers begin to wonder why it has not sold.
Private-sale advantages
- Buyers can make conditional offers
- The seller has time to consider the price and terms
- Offers can be negotiated privately
- An acceptable offer can be accepted at any time
- It may appeal to a broader range of buyers
- The campaign can be adjusted in response to market feedback
Private-sale considerations
- There may be less urgency for buyers
- Negotiations can take time
- A conditional agreement provides less immediate certainty
- An unrealistic advertised price can discourage interest
- A longer campaign can lose momentum
Auction costs vs private-sale costs
Before choosing a method of sale, ask your agent for a clear breakdown of the likely costs.
Both auction and private-sale campaigns may include:
- The real estate agency’s commission and administration fees
- Professional photography and video
- Floorplans and property copywriting
- Online advertising
- Signage and printed marketing
- Home staging or styling
- Cleaning, gardening and minor repairs
- Legal fees
An auction campaign may also include an auctioneer’s fee and potentially a more concentrated marketing programme designed to reach as many qualified buyers as possible before the auction date.
Marketing costs vary depending on the property, location and agreed campaign. Your agent should explain the recommended programme and provide the relevant written estimates before you commit.
How to sell your home at auction
Selling at auction can be effective when a property is likely to attract several interested buyers. Preparation and a strong campaign are essential.
Your agent should help you:
- Review recent comparable sales
Look at similar properties that have sold nearby, how they were marketed and the prices they achieved. - Assess local buyer demand
Consider enquiry levels, open-home attendance and the number of active buyers in your area. - Prepare the property
Complete any maintenance, presentation or staging required before photography and buyer inspections begin. - Build a focused marketing campaign
Promote the property across the channels most likely to reach suitable buyers. - Make information available
Ensure prospective buyers can access the auction documents and any property information you have agreed to provide. - Monitor buyer feedback
Your agent should keep you informed about enquiry, repeat visits, due-diligence activity and potential bidders. - Set the reserve price
The reserve is generally confirmed closer to auction day, taking the campaign’s buyer feedback into account. - Prepare for every outcome
Discuss what will happen if you receive a pre-auction offer, the property sells under the hammer or it is passed in.
Auction-day checklist for sellers
Auction day can be exciting, but it can also feel stressful. A clear plan can help you approach it with confidence.
Before the auction:
- Confirm the reserve price with your agent
- Review the auction process
- Discuss how pre-auction offers will be handled
- Understand the rules relating to vendor bids
- Confirm the deposit and settlement terms
- Make sure the property is well presented
- Decide where you will be during the auction
- Discuss how your agent will communicate with you
- Prepare for the possibility of post-auction negotiations
Your agent and auctioneer should explain the rules and answer any questions before proceedings begin.
What happens if your property is passed in?
If bidding does not reach the reserve, the property may be passed in. While this can be disappointing, it does not mean the campaign has failed.
Your agent may begin negotiating with the highest bidder or other interested buyers immediately after the auction. Because buyers have already completed much of their due diligence, an agreement can sometimes be reached relatively quickly.
- If the property does not sell on the day, your agent should review:
- The level of bidding
- Feedback on the property
- Buyer views on price
- The reserve and your expectations
- The marketing strategy
- The next method of sale
You may decide to continue negotiations, advertise a price, sell by negotiation or launch a new campaign.
Which selling method is right for your property?
There is no single method that will suit every seller or guarantee the highest price.
An auction may be worth considering when:
- The property is likely to appeal to several buyers
- Comparable properties are selling successfully at auction
- Demand is strong and available stock is limited
- The property has distinctive or highly sought-after features
- You want to create urgency through a fixed date
- An unconditional sale is important to you
A private sale may be more suitable when:
- Buyers in your area expect to negotiate privately
- Likely purchasers may need finance or other conditions
- You want more time to assess each offer
- Flexibility around the sale terms is important
- There is no immediate deadline to sell
- Buyer demand is limited or difficult to predict
Your circumstances matter too. If you have already bought another property or need to move by a particular date, a time-bound campaign may provide useful focus. If you are comfortable waiting for the right offer, a private sale may offer greater flexibility.
Are there other methods of sale?
Yes. Two other methods commonly used in New Zealand are deadline sale and tender.
Deadline sale
A deadline sale combines private offers with a set closing date. Buyers submit written offers, which may be conditional or unconditional.
Depending on the campaign terms, the seller may be able to accept an offer before the deadline. This should be clearly stated in the advertising.
Tender
With a tender, buyers submit confidential written offers by a specified date and time. The seller reviews the offers and may accept one, reject them all or enter further negotiations.
The highest offer is not necessarily the best. The seller can also consider conditions, the deposit, settlement date and the buyer’s overall ability to complete the purchase.
Your LJ Hooker agent can explain which methods are commonly used in your area and recommend a strategy for your property.
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