#036 Methods of selling a property. Which one is best for you?

methods of selling a property from Ask the Estate Agent Podcast
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There are several different methods of selling a property which we have outlined below along with a few reasons why each method is typically used. If you’re thinking of selling then each of these methods should be assessed as to which one meets your goals and objectives best.

The methods most commonly used are:

  1. Private Treaty
  2. Traditional Auction
  3. Modern Method of Auction
  4. Informal Tender
  5. Formal Tender

Now lets go through each method in a bit more detail:

  1. Private Treaty

The process called “For Sale by Private Treaty” is the method employed by most estate agents, 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. 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.

When used:

The vast majority of presentable residential property where the seller is looking to move from one home to another.

Average time to sell from initial marketing to completion is currently around six months at the time of recording so this potential and varied timescale should be considered when choosing Private Treaty.

At present approximately 30% of transactions collapse before exchange of contracts and the average amount a homeowner loses in that process is around £2,900.

  1. Traditional Auction

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, at which 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. He pays 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 buyer has to arrange finance and make any enquiries (including carrying out a survey) before he bids. It is too late afterwards.

When used:

Properties for which there is likely to be strong competition – so that it does not matter if some prospective buyers are not able to bid.

Properties that are most likely to appeal to cash buyers (rather than those with a property to sell or needing to borrow) – for example building plots and properties needing renovation or redevelopment.

Properties with serious defects, where there is a fear that buyers by Private Treaty might keep pulling out because of concerns over the risks they are taking

Those where it is very difficult to predict the likely sale price.

When the seller needs completion within a certain timeframe.

  1. Modern Method of Auction

New concept more commonly known or referred to as online auction.

The successful buyer is required to pay a Buyers Reservation Fee/Deposit and sign a Reservation Agreement. The property is then reserved to the buyer. The buyer and seller are then required to unconditionally exchange contracts and complete the transaction within 56 days.

This allows buyers time to raise finance so opens the auction to more potential buyers.

No Agency fees and the seller receives the full auction price achieved.

Often an upfront charge for the auction pack paid for by the seller.

When used:

Properties for which there is likely to be strong competition.

Can offer a wider range of buyers with the right marketing due to extended timescale between reservation and exchange of contracts. This allows buyers to raise finance for the purchase if required.

Those where it is very difficult to predict the likely sale price.

When the seller needs completion within a certain timeframe.

  1. Informal Tender

In the process known as ‘For Sale by Informal Tender’ the asking price will not be stated generally a guide price will be given. Written offers will be invited (sealed bids) and a closing date for such offers 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.

When Used:

Properties where competition is strong and a choice of buyer is likely or anticipated. Properties that require modernisation (defects highlighted at survey).

Where a closure date  for accepting offers is required or desired.

  1. Formal Tender

When a property is sold by formal tender, as with an informal tender, the sale will be advertised with a deadline by which prospective purchasers must submit their bid.

Each tender document from the bidders must include the full legal contract for sale and all bids have to include a bankers draft as a deposit on the contract. The bids are opened by the vendor or agent (representative). As soon as the “best bid” is selected, the bankers 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.

Generally rarely used due to its complexity.

When Used:

Some land transfers and highly desirable, unique properties.

When the seller urgently needs to be completed within a certain time frame.

That concludes this episode of the Podcast so thank you for listening and I hope you find this content helpful.

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So don’t forget to contact us with any subjects you would like us to cover or questions you would like answering in the coming episodes and until next time I would like to thank you for listening and goodbye for now.

About the author, David Thomas

David Thomas is an Entrepreneur and passionate Estate Agent who loves helping others on their property journey.

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