If you have decided to ready your home for a summer sale you'd better get your skates on to beat the rush. September is often the start of the year's peak selling season in Australia but agents say August can yield better results because there's less on the market. Once you've decided when you want to sell, the next big decision is whether you do so by auction or private treaty. Increases in the residential real-estate market point to more properties being sold under the hammer than a year ago (see table), but experts say you can get what you want by private treaty as long as your pricing is spot on. The verdict seems to be that if your property is unique or has that extra-special something, you're better off selling at auction. But if it doesn't stand out from the crowd or your area is slow to sell, you may be better off with a private treaty sale. The good news is that prices seem to be on the rise. Residential property prices in Melbourne are set to increase 7 per cent this year, says Louis Christopher of Adviser Edge Investment Research, with Sydney tipped for 10.5 per cent growth. "The market is recovering," says Christopher, head of property research at Adviser Edge. "In Melbourne it began at the beginning of last year - it's been slow but it's speeding up a little. In Sydney, the recovery began in January." While last year auction clearance rates in Sydney were about 51 per cent, this year the figure is closer to 70 per cent, he adds. In Melbourne the figure was 60 per cent for last year but is now about 75 per cent. But in both cities there's a two-track market - premium properties are making double-digit returns, says Michael McNamara, operations manager at Australian Property Monitors, while properties at the lower end of the price scale are struggling. "We are continually seeing stories about bankruptcies and mortgage delinquencies," McNamara says. "Areas where demand is strongest are the natural home for a strong auction market. Those areas where prices are weak or turnover is slow are arguably better suited to a private treaty." Get the price right The great thing about auctions, McNamara argues, is that they entice buyers before a firm price is set - as long as the agent is canny about the appropriate price range. "If it's a unique property or one that will get a lot of interest, an auction is the best way to determine the true price," he says. "People can come to open inspections and evaluate the property independent of the price - they can develop an interest for the property first, rather than being tainted by the price." Selling by private treaty, on the other hand, means there's a set dollar value on the property even before there are interested parties. Getting the pricing wrong will mean putting off potential buyers before they've set foot in your home. Timing is crucial, McNamara says, because anecdotally the best buyers are those who show interest in the first two or three weeks of the campaign. "The danger of putting your property on sale via private treaty is that if you get the price wrong, you will put those buyers off," he says. "There are so many listings online these days that buyers set automatic alerts [in their email inbox] for new properties that come on to the market. "Buyers will very quickly get to see the property and go to open inspections. If you put a price on the property and you get it wrong, you run the risk of blowing off your best buyers right at the outset." The average discounting in the market is about 8 per cent, McNamara says, meaning asking prices are negotiated down by about that amount. "If you over-egg the cake, a lot of people won't be prepared to negotiate," he says. "That's why sometimes if you're not absolutely confident of the price you're putting your property on, you should take it to auction." Consider costs The difference between selling by auction or private treaty has traditionally been cost. Intensive three-week marketing campaigns in preparation for an auction add up to big bucks. Ray White real-estate agent Annette Pollak puts the marketing costs for a $700,000 property at almost $10,000. By contrast, most people envisage spending less if they're selling by private treaty. What they don't take into account, Pollak says, is that if the property takes longer to sell, the marketing costs can go on indefinitely. "If you start with private treaty you don't know where it's going to end, there is no cut-off date and no set program. Costs can mount up very quickly," she adds. "By the time you've got ads in The Sydney Morning Herald or The Age as well as a proper local campaign, if nothing happens because there's no urgency for buyers to make a decision you can find yourself paying out a lot more money than in an auction campaign where there is a date that says the buyer has to make a decision." Focusing on selling costs is concentrating on the wrong end of the deal, Pollak argues. While you may spend thousands of dollars on prominent advertising, just one good bid at the auction room may get you an extra $20,000. "What you're giving your property is the opportunity to get top dollar," he says. To help you come to a decision on which way to sell, find out about how long properties in your area are taking to sell. If you opt for private treaty - making sure your asking price is on the money - McNamara argues you can keep costs down by not marketing intensively for the first three weeks but "spreading the risk over time". Make sure your online bases are covered, though, because that's where so many property searches begin. Do your homework Conduct your own research into your local property market. If you have time up your sleeve, compile your own dossier on local sales and what similar homes have fetched. Visit open days and keep an eye on sale prices to see which properties have been doing well at auction versus being sold by private treaty. If you haven't got time to follow the market that closely, a service such as Home Price Guide (www.homepriceguide.com.au) can do the legwork for you. For $59.95 it will give you the prices of all the properties sold in a particular postcode for a year ($99.90 for two years). The report will give descriptions, addresses and whether it was sold via auction or private treaty. An online live version for three months will cost $99.95. Make up your mind Agent Annette Pollak argues that auctions are the best way of achieving a top sale price. "It's a transparent process. You can see people bidding away," she says. "All you need are two people there who really want it, and you can achieve a fantastic price - you can't get that with a private treaty." She believes even properties without that unique appeal should go under the hammer. "How do you know what's unique and what isn't? It's such a subjective thing," she says. "There have been lots of properties I thought wouldn't be easy to sell: I had one recently on a main road and suddenly there were two people fighting over it and we got a great price." Christopher does not agree. "I don't buy that. Agents always love auctions because they're a great conditioning technique . . . as the owner you think your property is worth lots of money so the agent will suggest testing the market at auction. "Of course, you're paying for the auction expenses - which are generally higher than private treaty - and if the auction doesn't go as planned, you're being conditioned to getting a lower price. I strongly disagree - auctions should only be used on unique properties." He argues that in some cases there is an in-built ceiling in the auction process. "The auction price will only be as high as the second-highest bidder's price," he says. Plan of action * Base your timing on your emotional readiness rather than what you've been told is the best season. Moving home is a huge decision and shouldn't be rushed. Sell when you are ready. * Declutter the property room by room and be ruthless. * Bring in a stylist or ask your agent for advice on how best to present your home. * Carry out any capital improvements such as painting if it's likely to add value. * If you can't bring the whole of the property up to speed, showcase one particular area. Pollak points to a recent property, a deceased estate, where money was spent on getting the garden landscaped rather than on the house itself. Case study MARTINE McCormac-Taylor found the auction process reassuringly transparent when she and her husband bought their first home recently. She'd expected frantic bidding and an inflated price but found seeing the other buyers helped her gauge the true market value of the property. "It was a lot calmer than I expected. We knew exactly what we were willing to spend and we were confident we were doing the right thing on the day," says Martine, pictured with son Asher, 8, and daughter Alia, 2. The house was passed in at the auction, but in later negotiations the family secured the property on their final bidding price. They felt their offer was fair because no one else at the auction was prepared to top it. Martine describes auctions as "exactly the same process as private treaty, except that one is behind closed doors". UNDER THE HAMMER How more properties are selling at auction Clearance rate Clearance rate Clearance rate May 2007, % April 2007, % May 2006, % Adelaide 77 70 61 Brisbane 55 54 44 Canberra 75 73 54 Melbourne 81 79 63 Perth 43 30 60 Sydney 64 60 51 Source: Australian Property Monitors and the Age

Aug 1, 2007