When it comes to buying a house in Australia, understanding the ins and outs of the sales process is essential. One popular method is a private treaty sale, which differs significantly from the widely-known auction process.
This article guides you through what a private treaty sale involves, how to negotiate effectively, and the benefits of buying a home through private treaty. It’s a must-read for anyone preparing to step onto the property ladder or seasoned investors looking to expand their portfolio.
What is a Private Treaty Sale?
A private treaty sale is a common method of selling property in Australia. Unlike an auction, where the highest bidder secures the property, a private treaty sale is a process where the seller, often with the assistance of a real estate agent, sets a price range for their property and invites potential buyers to make offers.
In this method, the property is listed for sale, and interested parties inspect the property and make offers within the specified price range. The negotiation takes place between the seller and the buyer, often through the real estate agent, until a final sale price is agreed.
This method of sale, commonly known as a private treaty sale, allows more time for buyers to consider offers, conduct building and pest inspections, and secure home loan approval, which can make it a less stressful and more controlled process than buying a house at auction.
Private Treaty Sale vs Auction: What’s the Difference?
There are essentially two ways residential property is sold in Australia: by auction or by private treaty. The key differences lie in the process and timing.
During an auction, bidders compete openly on auction day, and the highest bidder wins, provided the bid meets or exceeds the seller’s reserve price. Auction campaigns are typically intense and fast-paced, often running for just a few weeks. If a property is sold at auction, the buyer must sign the contract and pay the deposit immediately, with no cooling-off period.
Conversely, in a private treaty sale, the property is advertised with an asking price or price range, and potential buyers are invited to negotiate on the price. Unlike an auction, buyers have a cooling-off period (typically five business days in NSW), allowing them to rescind the offer. However, the seller may impose a fee if this happens.
Navigating the Private Treaty Sale Process
When you’re buying real estate through private sale, the process begins with the property listing. Potential buyers can inspect the property at open houses or private viewings. If you’re interested in the property, you can make an offer to purchase the property. Once you put in an offer, the seller may accept it, reject it, or negotiate further.
After the offer is accepted, the buyer and seller sign the contract of sale. The cooling-off period begins after the contract is signed, and during this time, the buyer can decide to back out of the sale.
Once the cooling-off period ends, the contract of sale becomes unconditional, and the buyer is legally obligated to purchase the property. The sale is completed at settlement when the balance of the purchase price is paid, and the property’s ownership is transferred.
Negotiating as a Buyer in a Private Treaty Sale
The ability to negotiate price and terms is one of the key advantages of a private treaty sale. For first-timers buying your first home in Australia, having the opportunity to negotiate a fair price based on the property market conditions and your budget is vital.
Here’s how to negotiate effectively:
Research: Understand the local property market and recent sale prices of similar properties.
Make a Reasonable Offer: Making an offer too far below the asking price could result in the seller not taking you seriously.
Don’t Show Too Much Emotion: Stay calm and professional. Revealing too much about how much you want the property could weaken your negotiation position.
Be Prepared to Walk Away: If the seller isn’t willing to accept a price you’re comfortable with, don’t be afraid to walk away.
Securing a Home Loan for a Private Treaty Purchase
When buying a home through private treaty, securing a home loan pre-approval can give you a competitive edge. With pre-approval, you know exactly how much you can borrow, which can help you negotiate with confidence.
To secure a home loan, you will need to provide your lender with various documents, such as proof of income, credit history, and information about your debts and assets. The lender will assess your financial situation and determine how much you can borrow.
The Advantages of Buying a Property by Private Treaty
Buying a property by private treaty offers several advantages:
Negotiation: You have the chance to negotiate on the price and sale conditions.
Less Pressure: Unlike at auction, you have time to consider your offer and conduct necessary checks such as building and pest inspections.
Cooling-off Period: This period allows you to reconsider your purchase or withdraw your offer, although fees may apply.
Finance: The sale is usually subject to finance, meaning if you can’t secure a home loan, you can opt out of the purchase.
With these points in mind, the private treaty property sale method can be a less stressful and more controlled way to purchase a property.
Frequently Asked Questions
What is the process for a private treaty sale in QLD?
A private treaty sale is a process where a property is listed for sale at a fixed price, and interested buyers can make an offer to purchase the property. The seller can choose to accept, reject, or negotiate the offer until an agreement is reached. In QLD, the process for a private treaty sale involves the following steps:
- The seller lists the property for sale at a fixed price.
- Interested buyers inspect the property and make an offer to purchase.
- The seller can accept, reject, or negotiate the offer until an agreement is reached.
- Once an agreement is reached, a contract of sale is prepared and signed by both parties.
- Settlement takes place on the agreed date, and the property is transferred to the buyer.
What are the disadvantages of selling a property through private treaty?
Selling a property through private treaty has some disadvantages, including:
- Limited exposure: The property is only marketed to a limited number of potential buyers, which may reduce the chances of achieving the best possible price.
- Longer selling period: The property may take longer to sell through private treaty, as the seller waits for the right buyer to make an offer.
- Price uncertainty: The seller may not know the true market value of the property, as the price is not determined through a competitive bidding process.
What does it mean when a property is sold by private treaty with price withheld?
When a property is sold by private treaty with price withheld, it means that the seller has chosen not to disclose the asking price of the property. Instead, interested buyers are invited to make an offer based on their own assessment of the property’s value. This approach is often used when the seller is unsure of the property’s true market value or wants to test the market to see what buyers are willing to pay.
Can you provide an example of a successful private treaty sale?
A successful private treaty sale involves the seller receiving an offer that meets their expectations and leads to a successful sale. For example, a seller lists their property for $600,000 and receives an offer of $620,000 from a buyer. After negotiating some minor details, the seller accepts the offer, and the property is sold for $620,000 through the private treaty process.
Why do some sellers choose to sell their property by private treaty instead of auction?
Some sellers choose to sell their property by private treaty instead of auction for the following reasons:
- Control: The seller has more control over the sale process, including the marketing, negotiation, and acceptance of offers.
- Lower costs: The costs associated with a private treaty sale are generally lower than those associated with an auction.
- Privacy: The private treaty process is more private than an auction, which may be preferable for some sellers.
What are the key differences between a private treaty sale and a public auction?
The key differences between a private treaty sale and a public auction include:
- Price: The price is fixed in a private treaty sale, while it is determined through a competitive bidding process in an auction.
- Negotiation: The negotiation process is more flexible in a private treaty sale, while it is limited in an auction.
- Timeframe: The timeframe for a private treaty sale is generally longer than an auction, which is a one-day event.
- Costs: The costs associated with a private treaty sale are generally lower than those associated with an auction.
