Understanding negotiated sales vs auctions

What is a negotiated sale?

A negotiated sale is a method of selling an asset that involves direct negotiations between the seller and buyer. They will discuss the terms and price of the asset to reach a mutually acceptable agreement and avoid a competitive bidding process. 

Negotiated sales are well suited to niche, complex or high-value assets, as they provide confidentiality and efficiency and enable sellers to maximise their returns in sectors where buyers and demand are limited. 

What is an asset auction?

A public auction is an open and competitive sale where commercial assets are advertised widely to attract buyers. Prospective buyers make public bids on an asset, and the highest bidder wins. 

Auction sales are well suited to assets in high demand, as the competition between the buyers drives up the price. The auction process can be fast and efficient, although there is some uncertainty as you never know whether an asset will sell or what price it will reach.

What are the key differences between negotiated sales and auctions?

Generally speaking, auctions are a good fit for common, in-demand commercial assets, while negotiated sales are better suited to niche assets in less competitive markets. At Eddisons Auction Assets, we use both sales processes to sell assets ranging from plant and machinery and engineering tools to commercial vehicles, office equipment and antiques. 

The main differences between these sales methods include:

Process

• Negotiated sales - The seller negotiates directly with a single buyer or a small group of buyers to determine the price and terms of the deal.  

• Auction - A public bidding process allows unlimited numbers of would-be buyers to compete for an asset. 

Price

• Negotiated sales - The buyer and seller negotiate to determine a price that’s acceptable to both parties.

• Auction - The selling price is determined by the highest bid received during the live auction. The seller can set a minimum price (called a reserve) that bidders must meet for the asset to sell. 

Speed

• Negotiated sales - Although the discussions can be resource intensive, you can reach an agreement quickly, sometimes in just a few days. 

• Auction - Asset auctions are typically live for 30 days, and the assets must be valued and marketed beforehand. However, once the auction has finished, the sale is finalised very quickly. 

Confidentiality

• Negotiated sales - The negotiations take place privately and the terms of the deal are confidential. 

• Auction - The process is completely transparent as all bidders can see who has made the highest bid and how much they have paid. 

Flexibility

• Negotiated sales - Private negotiations allow for more flexibility around the terms and timing of the deal.  

• Auction - There’s very little flexibility as the asset is sold as seen and full payment is made within 24-48 hours of the auction ending.

Negotiated sale vs auction - pros and cons

When choosing the right sales process for your commercial assets, you must weigh up the advantages and disadvantages of each and consider how they align with your goals. 

Negotiated sale

Pros

• Flexibility in the negotiations allows both parties to tailor a deal that suits their needs

• You have more control over the timeline of the sale and can sell quickly or slow things down accordingly

• The details of the transaction are private, which protects sensitive information and can be a benefit in niche markets

Cons  

• The price you achieve may be lower without a competitive bidding process

• The negotiations can be time-consuming, require potentially expensive input from third parties and be subject to delays

• Closing the transaction to a single buyer limits the seller’s negotiating power

Asset auctions

Pros

• Competitive bidding pushes up the price of an in-demand asset and ensures the seller receives market value

• Asset auctioneers can handle every stage of the process, from listing and advertising assets to the post-sale process

• Once the hammer falls, the sale is final and the seller receives full payment within 24-48 hours

Cons

• There’s price uncertainty as you never know how much you’ll receive for an asset or whether it will sell until the hammer falls

• There are additional fees for sellers that eat into your profits

• You may have to pay listing fees even if the asset doesn’t sell

Finding the right sales process for your assets

At Eddisons Asset Auctions, we conduct more online asset auctions than anyone else in the UK and arrange negotiated sales for our clients according to the asset type, industry and their goals. Find out more about our asset sales process and get in touch for a free, no-obligation asset appraisal.