A private treaty sale is amongst the most common ways to buy or sell a property in Australia. Knowing where to look for your next (or first) home is one thing, but using negotiation tactics to secure it can be something different entirely.
Let’s take a look at how it works and discuss the ins and outs of the process.
How it all works
A private treaty sale refers to a property being listed for sale with an asking price. Interested buyers make their offers to a real estate agent, who then passes that offer on to the seller. The seller will either accept the offer and the property is sold, or reject the offer and it remains listed for sale.
There are usually several offers made between a buyer and a seller, negotiating back and forth until an agreement is reached. A real estate agent acts as a ‘middle man’ passing on each offer and counter-offer between the two parties.
The vendor starts by listing the home at a price they desire, however this will usually be an overestimation to allow for the inevitable negotiation of buyers. It’s very rare that a buyer will offer or agree to pay the original listed price.
Your initial offer is oftentimes the most difficult to make. If there is a high level of interest in a particular property, it might be best to submit your absolute best offer right from the get-go. Alternatively, you could proceed with a significantly lower off than the asking price, then negotiate upwards in small increments.
Making low-ball offers straight off the bat can be extremely risky as you can lose the property quite easily to another buyer with a higher offer.
Find out all the information regarding the seller’s situation as this makes it easier to get an idea on what to offer. For example, some vendors might be selling out of financial desperation or time constraints which can work to your advantage dramatically.
It’s important to remember that agents always work for the vendor, so they’ll be trying to get as much money out of you as possible. However, with a high-interest property it’s usually best to make one offer and make it your best and final.
Get your finances organised well in advance with a lender’s pre-approval. This way, you know exactly how much money you have to negotiate with. On the other hand, you can make an offer subject to finance which will allow you a certain amount of time to receive an approval letter from your lender.
It’s also a good idea to make your offer in writing for the agent to submit which may need to be reevaluated a few times during the process.
Conditional vs. Unconditional Offers
A conditional offer is a formal contractual agreement subject to any conditions agreed upon by the buyer and seller. The buyer can legally back out of the deal if conditions aren’t met by the seller.
Unconditional offers are outright and should be carefully taken into consideration before agreeing to sign on the dotted line. You need to ensure that you have the funds organised and are ready to buy the property as is.
Once the vendor accepts your offer, legally you must proceed with the purchase. If you wish to go back on the deal beyond this point, it is likely that you’ll lose your deposit.
Always speak with a solicitor or conveyancer and run through any contractual conditions properly. Understanding exactly what you’re buying is the ultimate key to being 100% satisfied with your purchase.