Which method of selling your house gets you the best price?

The different ways to sell a house are as long as your arm, although some of the methods overlap quite a bit.

All methods come with pros and cons for both the seller and the buyer. In the current cooler market you might find more homes are advertised by price by negotiation (PBN) or by an advertised price whereas in a hot market any method with a deadline attached is popular with vendors because that creates competition.

Here are some of the most-used methods of sale along with some of their strengths and weaknesses.

Advertised price (or fixed price or list price)

Former Property Institute of New Zealand CEO and OneRoof commentator Ashley Church believes this is the method of sale in a flat market because it gives certainty.

"With the advertised price, that’s the price,” he says.

But in a rising market the disadvantages are clear: a vendor could set a fixed price one week only to find a week later that buyers would have been prepared to $10,000 or more for the home.

“However, it’s a reasonably safe tool in a flat market. It gives buyers certainty around what it’s going to cost them. It doesn’t mean they can’t negotiate but it does mean they have a pretty clear idea of what they’re going to have to shell out for that property.

"The overwhelming theme in this market is the best way to sell is to give your buyer as much certainty as possible around what it’s going to cost to buy the property. None of the other techniques do that."

Price by negotiation

With this method properties are marketed without a price indication.

“The theory behind this is that potential buyers will offer what they believe the property is actually worth, or, at least, what it’s worth to them,” says Church.

There is no deadline date and vendors can negotiate with buyers and accept conditional offers, which benefits buyers who want to make an offer but also get a builder’s inspection and organise their finance.

This type of method is often seen in a cooler market. Kevin Lampen-Smith, chief executive of the Real Estate Authority, describes it as like a tender without a date. Buyers get to make a cheeky offer if they want to and whether the vendor bites or not depends on how desperate they are to sell.

Auction

This is the most transparent of all the deadline methods, says Lampen-Smith.

At auction prospective buyers know what the competition is. Buyers bid against each together on site or in an auction room, and the bids are public, which is a big plus given that offers made under other deadline methods are for vendor eyes only.

A downside for buyers, but not for vendors, is that intense competition and a fear of missing out can push prices beyond their financial limits. However, the key to winning an auction and securing the property is simple: make the final before the hammer drops. Being the last bidder also puts buyers in the driving seat if the property passes in as they have first negotiation rights with the vendors.

Yes, there is the that risk buyers might spend too much in a hot market but the upside is they could spend less than their budget in a flatter market.

For vendors, auctions can be great, Lampen-Smith says.

“It does suit the hot market because it gets the emotions going – essentially, as a seller you’re hoping someone’s going to get a little bit carried away and keep on going,” he says.

But vendors also run the risk of not getting the best price from all the potential purchasers present because the top bidder doesn’t have to expose their top price – they need only go above the second highest bidder.

Deadline treaty / Set date of sale

For this method of sale, all offers must be submitted by a fixed date. Unlike with auctions offers are confidential, putting buyers under pressure to make their best offer. Church says an offer can be accepted and the property sold prior to the deadline but the vendor is under no obligation to accept any of the offers.

Tender

This is similar to a deadline treaty except vendors can’t accept an offer prior to the closing date of the tender. Like the auction process, the tender process is about creating a sense of urgency and works best in a hot market.

Expressions of Interest

Prospective buyers are invited to register their interest within a time frame without any price indication.

“Expressions of interest is ‘tell us what you think it’s worth and we’ll tell you whether or not we like that,’” says Church.

Lampen-Smith says this method might be used if agents and vendors are looking to find out who is seriously interested in the property: “It could be used to just siphon away those who are just tire kickers and it might be for more exclusive properties,” he says.

The common mistakes sellers can make

Bindi Norwell, chief executive of REINZ, says: “Selling your home can be an extremely stressful and emotional process – not to mention the fact that you’re most likely selling your largest asset. Therefore, it’s important that you do your research and understand the current market before listing your home for sale.

She says some of the most common mistakes people make include:

· Not doing your research – go to open homes in your area and see what people are doing to present their property for sale so you can understand the ‘competition’ and pick up some great ideas;

· Selling without using an agent or not choosing the ‘right’ agent;

· Not listening to their agent about what is a realistic price for your house (or under or over pricing your house). Many sellers make the mistake of turning down a good offer in the hope that in a few weeks’ time a stronger offer will come along, only to leave the house on the market for another few months and end up selling for even less;

· Not getting your house ‘sale ready;/not presenting it in the best light – at a bare minimum think about decluttering, cleaning and sprucing up the property. If you can afford it, staging your home is a great way to present it in the best light possible;

· Overcapitalising on renovations before selling – just because you love your renovations doesn’t mean a potential buyer will. Undertake the basic renovations before listing your property for sale, but leave some room for the new purchaser to make their own park;

· Thinking about including tech as part of your overall marketing – think social media, VR, floorplans, great drone footage, you tube videos etc so that you can reach as many buyers as possible. Another few hundred dollars on marketing spend could be the difference between reaching ‘your’ buyer or not; and

· Not being flexible with viewing.