Are auctions three times better than Private Treaty?

There was a suggestion a while back from an industry professional for whom I have a great deal of respect, that auctions are three times better than private treaty. He runs a successful auctioneer agency which is highly regarded. Disappointingly, this article is codswallop, being totally slanted in favour of the auction process and it comes at a time when the market is tightening, auction clearance rates are down and there is a greater tendency towards the generally regarded default process, private treaty. I accept that I am playing Devils Advocate here, but to say that auction is three times better than private treaty or that it has three times the “charm” is simply not credible. As an agent who is neither anti nor pro either auction or private treaty, I firmly believe that the several methods of sale available (auction, private treaty, expressions of interest, tender) are all valid processes, depending on market conditions, the type of property, probable price range, probable demand, time frame, reason behind the sale and need for “transparency”, and the list goes on. The article fails to address the reasons why auction may not be appropriate, some of the same reasons that staunch supporters of the process may argue are in its favour. For example, transparency – the auction itself is a comparative process, where everyone knows everyone else’s position. Arguably, the highest bidder or buyer is therefore likely to be paying only a fraction more than where the under-bidder sees value and has driven to buyer to, even though the buyer may see greater value in the property than where the highest bid would suggest. There is undoubtedly a higher attrition rate amongst buyers when a property is listed for sale by auction – some buyers simply refuse to get involved in the process. Whereas, it is very, very rare for buyers to not want to engage with a private treaty process. There is no doubt also that a property that passes in at auction then has a certain stigma attached to it. Buyers are generally very wary of the reasons given as to why a property “fails” to sell at auction.

These few words are not intended as a comprehensive discussion as to which method of sale is “better”, they simply seek to put some balance where it is otherwise lacking.