Private treaty sale or auction? This is a fundamental real estate question that divides prospective sellers and buyers like no other. Ask 10 different sellers/buyers and you'll get 10 different reasons for preferring auction or private-treaty (fixed price) selling.

It's even more interesting if you're an investor, buying property - what is the right buying option? Auction or private treaty sale (i.e. a set price)??

To shine a bit of light onto the subject today we'll look at:

- Main reasons why people sell via auction and private treaty

- How these reasons relate to the Brisbane CBD residential apartment market

- What a well-seasoned investor says and why ...

Why properties are auctioned ...

• Rare/Unique type of property. The property is different to others in that particular market and its 'true' value is hard to properly judge. This may be true for some very unique penthouse-style CBD apartments or a rare type of unit (e.g. unusual floorplan) in a heritage-listed building. However, the large majority of CBD apartments do not fall into this category.
• Only a few recent sales comparisons, in that postcode or area. This is only true for unusual or rare styles of CBD apartment, not for the bulk of the CBD property stock.
• Sometimes preferred in order to 'speed up' a sale. The downside is that this may come at a real 'cost' to the seller. Buyers sensing the urgency to sell may then push down the price, sometimes considerably.

Why properties are sold via private treaty ...

• Sellers understand the 'true value' of their property in that market. Sellers who 'do their homework' and get reliable appraisals for a 'standard' 1, 2 or 3 bed CBD unit know what their property is worth in that market.
• It is a popular & typical type of property in that area. Most CBD properties are 1, 2 and 3bed units with or without carspace(s) in buildings that are up to about 15 years old and located in the CBD centre. These are what the vast majority of CBD buyers are predominantly looking for.
• Fixed price properties may appear to sell quicker than auctioned properties. This is according to property writer and investor, Cameron McEvoy.
• Fixed-price "properties tend to attract more genuine seekers", adds Cameron McEvoy. This may vary from market to market, but there is some inclination by certain buyers to just 'go and see what they can get out' of an auction. Buyers for a fixed-price property know where the pricing lies and may be perceived to be more qualified, researched and 'genuine'.

3 reasons why investors avoid auctions

Here are McEvoy's major reasons, as a seasoned property investor, for avoiding auctions when buying property for investment purposes:

• "I don't typically consider 'rare' or 'unique' properties for investment. This is because, as investors, it is not in our interest to do so. We'd rather hedge our bets on a property type that is high demand, so that we know it'll always be desired by renters. This helps avoid the risk of vacancy (which can crush an investors' bottom line if months and months of vacancy occur)"
• "During due diligence phases, I find non-auction [fixed-price] properties deliver more ticks on my shopping list. This extends back to property investment 101: Do your due diligence on your chosen suburb to make sure the property type you are buying, is the type that renters are wanting the most."
• "Financially, auction properties just do not stack up for me. As investors we are driven ultimately by the bottom line. Financially, there is added risk to buying investments at auction."

... in a nut-shell

"I am aware there may be other views on buying investment properties at auction, but in my experience, steering clear of auction properties in the best step investors can take to minimise risk and expedite property purchases.", concludes McEvoy.

(Source: "Why I don't buy investment properties at auction", Cameron McEvoy, Property Observer; Louise Moeller - HS Brisbane Property marketing consultant)