Residential properties sell mainly through private treaty or auction. Auctions offer no cooling-off period and require inspections upfront at buyer risk, but you can negotiate settlement terms before the sale. Private treaty is more common outside capital cities, while auctions dominate when markets are hot.
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So how is a property sold? First, a property may be going to auction. It could be a private treaty, which is often called a private sale, or it could go to tender. The latter is left usually to very expensive properties, so just let's leave that out. So let's talk about auctions Offers prior to auction. Your scope for adding your own conditions at auction is very, very small. You purchase the property at auction based on the vendor's contract of sale. Occasionally you can request special conditions from the vendor such as a lower deposit should you become the successful bidder. But these must be negotiated prior to auction and confirmation from the vendor solicitor has to be given in writing. Unlike private treaty sales where you do not have to incur the cost of a pest and building inspection until after your offer is accepted, with an auction, you will incur those costs before the property is purchased. Hence you have no guarantee that you will even be the highest bidder. It doesn't take many properties lost at auction for the costs of all those inspections to start to escalate. If making an offer before an auction, you need to be aware that if you are close to the auction date, the the vendor might see this as an indication that there is interest and hence they decide to proceed to auction. You also need to be aware that there is no cooling off period immediately either side of an auction. This period does differ in each state, so check it out for where you are looking at buying. If you put in an offer early, then the vendor may decide that their property is hot and hence commit to the entire auction campaign. Or on the other hand, where conditions are cool, it may be worth putting in a bid before auction. It carries its own risks as agents will be tempted to arouse other interested buyers to bid against your offer. Also remember, the longer the real estate agent's marketing campaign is being paid for by the vendor and their name is out there in the market, they are also benefiting. The reality is getting a conditional offer accepted prior to auction, that is an offer with conditions attached such as subject to due diligence, is very very difficult. Which means our sequence of accepted offer and then comprehensive house evaluation is not always possible. In the event that you can't get an offer accepted prior to auction, but you still feel that the property will sell within your price range, you are left with just two options. You can either carry out your comprehensive evaluation in the hope of securing it on auction day or or you can rely solely on your quick analysis calculations. The latter obviously is not without risk, so it may be wise to lower your bidding Limit to reflect that. If the property passes in however, and is clear of the cooling off period, then this becomes a private treaty sale. That is, unless the vendor decides to reauction immediately, which is really unlikely. If putting an offer in prior to auction, I either do it as soon as the property is listed with a short date deadline or in the last week of the campaign after the agent has been working on the vendors for their price expectations. So let's have a look at the terms. By agreeing on terms prior to an auction, you'll have a good negotiation point to start from if the property is passed in. And remember, you do this with your solicitor. Seek agreement on exaggerated terms. This could mean a long settlement of 120 days or more, or it might be a small deposit amount or. Or it could be the items that you want included in the sale, such as that fancy chandelier. This means you have additional things to negotiate around besides price as part of the overall negotiation. You can then claw some of these back in return for lowering the asking price. Try to always have additional point of negotiation. Don't just rely on price because you've got nowhere else to go. So let's have a look at private treaty, which is also private sale or it could be termed on the market. The other main type of sale is the private treaty, that is there is a market price set. Private treaty is the most common way to sell a house across Australia. This is mainly because auctions tend to be most popular in capital cities. Now, just because it's a set price, don't be fooled in going in at a lower price thinking that this guarantees the property. It all depends on the market. Now in 20092010 in Sydney for instance, it was not uncommon to see Dutch auctions going on. The vendor would say the property is on the market and listed at $650,000. And then the offers started coming in. The property would finally sell at $750,000 if the market is hot in the vendor's favour. In other words, when most properties are being sold under the hammer a above the reserve price, then that's what will influence a vendor in going to auction or just selling by private treaty at a set asking price. Now, from this point on, we're going to assume that we're dealing with private treaties because that's how most properties are sold.
