Buying Real Estate Part 9 - Private Treaty Purchase
Don't Get too Emotional
Buying a home through a private treaty sale is an extremely common method throughout Australia.
Many sellers choose to list their property through private treaty sales as they offer flexibility with negotiation and give them the chance to accept an attractive offer.
Although private treaty sales do not see the heat that auctions can get, it's still important to not become too emotionally tied to the home you want to buy. Leaving your emotions out of the equation will help you to negotiate with the agent. It will also reduce the risk of potentially blowing your budget if you become too attached to the home.
Research the Area
Do your homework and research recent sales and listings in the area that are comparable to the home you wish to buy. This will help you to judge whether the home has been priced fairly and how much you should submit in an offer.
Negotiating a Private Treaty Sale
- A private treaty sale occurs when a property is listed for sale with an asking price, the buyer makes an offer to the agent, who then presents the offer to the seller, who can then decide whether or not to accept the offer. Typically negotiations go back and forth between the buyer and seller (via the real estate agent) until an agreed price is reached.
- The seller usually lists the property for sale at their desired price, or sometimes higher to allow room to negotiate and the buyer will typically try to find the lowest price the vendor is willing to sell for.
- Deciding on what to offer first up can be difficult. You may wish to start with your best offer, especially if there is a lot of interest in the property or you could start with a lower offer and be prepared to negotiate up. The risk with starting lower is that you may lose the property to another purchaser who comes in with a higher offer.
- It is a good idea to try and find out as much as you can about the seller and their circumstances from the agent. If they are in a rush to sell because they’ve committed elsewhere, you might be in a position to come in with an offer lower than the asking price. Remember that the agent is working for the seller, so they will try to do everything to get the most amount of money out of you.
- If you do not have the luxury of time, perhaps when the market is very strong and there appears to be a number of people interested in the property, determine the maximum amount you are prepared to pay and make this your first and last offer.
- It is best to have your finance pre-approved so the seller knows you are serious and able to act immediately, however you can make your offer subject to finance, which will give you a limited time in which to receive confirmation from your lender that finance will be made available to you
- Always put your offer in writing to the real estate agent who will then present it to the vendor for consideration and then let you know if it has been accepted. You may need to reassess your offer several times before an agreement is reached.
Unconditional Offer Versus Conditional Offer
When you submit an offer, you'll also need to include any special terms and conditions for the sale of the home. For example, you may wish to have a longer settlement so you can sell your previous home, or perhaps the owner needs to fix up a certain part of the home. These conditions need to be included in the offer and the final contract of sale. Here is an overview of the different types of offers:
- Conditional Offers is a binding contract to buy a property, subject to certain conditions being met. If these conditions are not satisfied, the buyer has the legal right to back out of the contract. Common conditions may include subject to valuation, subject to finance or subject to a building and pest inspection.
- If your offer is unconditional, it is an outright offer to buy a property. You should be 100% sure that this is the property you want and that you have access to the money to buy the property. Legislation and the process of buying a property by private treaty varies from state to state, however typically speaking, once the vendor has accepted your offer, you are legally obliged to go through with the sale or risk forfeiting your deposit.
- Whether you are negotiating a conditional or unconditional offer, it is advisable to speak with your solicitor or conveyancer about your rights and all terms of the contract before you sign anything.