Once you’ve decided that you want to make an offer for a property there are two main methods to purchasing: auction and private treaty.
Deciding between auction and private treaty involves various factors. Start by considering your timeline and market conditions. At auctions you’ll be bidding against other potential buyers, will have to make fast decisions and will generally know if you will own the home when the auction concludes. If you’re negotiating through a private treaty you’re negotiating the sale price with the vendor and the initial price is set by the market value of the property, not a price reserve. The process can take days or weeks longer than an auction.
Buying at an auction
The auction process is an energetic and transparent way to purchase property, featuring a predetermined date and time where buyers compete by placing bids. An auctioneer leads the bidding, creating a lively atmosphere as the offers increase. The sale is finalised when bidding ceases, assuming the reserve price has been reached. Auctions are particularly prevalent in the Australian real estate market, often resulting in swift transactions.
A major benefit of auctions for buyers is the potential to acquire a property at a competitive price. The bidding war can sometimes push the final sale price beyond initial expectations, especially when multiple buyers are interested. Furthermore, the urgency created by the auction process can motivate buyers to act quickly, leading to faster decision-making. The competitive nature of auctions can be an exciting experience for buyers eager to secure their dream property.
However, auctions require buyers to be prepared, as setting a maximum bid and understanding the property’s value are essential. If the reserve price is not met, the property may remain unsold, which can be frustrating.
Remember these tips:
Knowing your maximum bid is just one part of being prepared. Knowing how much each extra bid will cost you in weekly repayments can help you make the tough decision of whether to keep bidding or not
When you buy at auction there is no cooling off period, the property is sold when the hammer falls
If you are worried about getting too emotional in the auction process you can make someone bid on your behalf, with your instructions to purchase
Ensure you know the conditions of the sale before you bid so you know when the property would settle,
If the property is passed in and you’re the highest bidder you’ll have the opportunity to exclusively negotiate with the vendor
If you're the successful bidder at an auction, you’ll have to sign the sale contract and typically a 10 per cent deposit on the spot.
Private treaty
Some buyers prefer buying through private treaty because it’s a slower, less emotional process than buying at an auction. Some buyers view it as a ‘fairer’ way to agree to a property price and conditions of sale.
The process begins with the seller listing the property at a set price, determined with the help of a real estate agent, based on current market trends and valuations. Interested buyers can then make offers, allowing for negotiation that suits both parties.
The primary advantage of private treaty sales for buyers is the control it offers in negotiations; you can negotiate terms that align with your needs, and delay inspections until after a price has been agreed. There is also a cooling-off period, depending on the state you live in, once the price is agreed.
Nonetheless, private treaty sales have their own set of challenges. Establishing a fair price is critical; an overvalued property may deter interest, while undervaluing it could lead to missed opportunities. The negotiation process may also take longer, which can lead to buyer fatigue.
Keep these tips in mind if you’re going to buy through private treaty:
You can take your time making bids on the property
You can negotiate certain terms and conditions of the sale in your favour
You can delay getting inspections and reports done on the property until after you’ve agreed on a price
Once you’ve agreed on a price to purchase the property there is a cooling-off period that depends on the state you live in
