Ways to sell your property

Understanding various selling methods can give investors a significant advantage. This month we explore the four main selling methods in New Zealand’s residential property market: negotiation, auction, tender, and deadline sale.

Negotiation (private treaty): Negotiation, also known as private treaty, is the traditional method of selling property where a listing price is set and interested buyers make offers that the seller can accept, reject, or counter.

Pros:

• Sellers set their desired asking price from the outset
• No fixed end date, allowing the property to remain on the market until sold
• Buyers and sellers can take time to consider offers
• Often less expensive than auctions, which have additional marketing and auctioneer fees

Cons:

• Sale period can be unpredictable and extend longer than anticipated
• Initial asking price can limit higher offers
• Often involves back-and-forth counteroffers, which can be time-consuming

Best suited for:

• Markets with stable or falling prices
• Properties with difficult-to-determine values
• Sellers who aren’t in a rush
• First-time sellers who prefer a less intense process

Auction: At an auction, interested buyers bid against each other in a public forum, with the property typically going to the highest bidder once the reserve price is met.

Pros:

• Creates urgency and competition that can drive prices higher
• Buyers complete due diligence before the auction, resulting in no-conditions purchases
• Clear end date for the sale process
• True market value is determined through open bidding
• No upper limit on potential sale price

Cons:

• Usually requires a more intensive (and expensive) marketing campaign
• The format can deter some buyers who are uncomfortable with the public, competitive nature
• Risk of not reaching reserve price
• Additional costs for the auctioneer

Best suited for:

• Rising markets where competition is high
• Unique or high-demand properties
• Sellers seeking a quick, certain sale date
• Properties with features that might spark emotional bidding

Tender: In a tender process, potential buyers submit confidential written offers by a specified date. Unlike auctions, bidders don’t know what others are offering.

Pros:

• Offers are private, reducing the influence of other buyers
• Like auctions, there’s no upper limit on offers
• Process tends to attract committed purchasers
• Clear deadline for offers
• Buyers can make offers without the pressure of public bidding

Cons:

• Typically, buyers get just one chance to put their best offer forward
• Competing offers remain unknown
• Similar to auctions – requires chunky marketing campaigns
• May not result in acceptable offers

Best suited for:

• Unique, high-value properties
• Markets with sophisticated buyers
• Situations where privacy is valued
• Properties where value is difficult to determine

Deadline sale: A deadline sale (sometimes called “by negotiation with a deadline”) combines elements of negotiation and tender processes, with a set date by which offers must be received, but often with more flexibility than a strict tender.

Pros:

• Creates timeframe pressure while allowing for negotiation
• Usually more open than tenders, with some agents providing feedback on offer positioning
• Sellers can consider offers before the deadline
• Like auctions and tenders, allows market to determine value

Cons:

• Process can vary between agencies
• Some buyers may be confused about the process
• Like other methods, may not result in acceptable offers

Best suited for:

• Balanced markets where neither buyers nor sellers have significant advantage
• Sellers who want urgency but also flexibility
• Properties appealing to first-home buyers or investors who prefer some negotiation opportunity

Trends

While comprehensive data on selling methods is scarce, past trends offer valuable insights:

• Auctions: Historically dominant in hot markets like Auckland, where at peak times (2016-2021) approximately 30-40% of properties sold by auction. This percentage fluctuates significantly with market conditions.
• Negotiation: Remains the most common method nationwide, with approximately 50-60% of properties sold via this traditional method.
• Tender/deadline sales: Have grown in popularity, particularly in urban centres and for high-end properties, accounting for roughly 15-20% of sales in recent years.

Recent cooling in the New Zealand market has seen a shift away from auctions in some regions, with negotiation and deadline sales gaining greater traction as sellers adapt to changing conditions.

When selling, consider your specific circumstances:

• Need a quick, definite sale? Auction might be best.
• Have a unique property with unclear value? Tender could maximise your return.
• In a slower market? Negotiation might provide the flexibility needed.
• Want a balance of urgency and flexibility? Consider a deadline sale.

As always, local market conditions and property-specific factors should guide your strategy. An experienced real estate agent will provide the best guidance.

Looking to sell? Call 0800 GOODWINS for a no-obligation property appraisal and sale strategy.