What is a private sale or private treaty?
Most people who buy homes in Australia do so by Auction or private treaty. So, if you’re buying a property via private treaty this is the process that you will likely use. Before you close the deal, it will help if you are well-informed on making an offer and negotiating the best deal.
This happens when the property is listed with a set price. Still, it is very unusual for the property to sell at the listed price. This is because the buyer and seller (Agent) will go through a series of negotiations after the property hits the market before they finally settle at a price on which they both agree.
Once the parties settle on a price, the contracts are signed and a 10% deposit is paid. Most contracts will include a cooling-off period but many sellers will request that the buyer waiver the cooling-off period as a condition of sale.
During the cooling-off period the seller has an opportunity to finish off the building, legal and financial checks. Remember that a cancellation of the sale during the cooling-off period could cost you a portion of the deposit, so it is worth having your solicitor or conveyancer check your contract before you sign.
Negotiating the private treaty sale
Negotiation is an important part of the private treaty sale it is the means by which you find the real market price of the property. Very few of us, however, have the skills necessary to ensure that we achieve the best market price for the property.
Many people are not comfortable with the whole process of negotiation, and while the seller has an agent, unless you have elected to go with a buyer’s agent you’re out on a limb.
Negotiation is not just about ensuring that you pay the best price. It is also about convincing the seller that they did well out of the deal.
Here are some hints on how to negotiate a good deal.
Have written pre-approval
Take along written pre-approval of your bond. This shows the seller that you are serious about buying the property. It can give you an edge during the negotiation. The pre-approval gives the seller the assurance that you are in the position to buy the property when you settle the price.
If you think about it, if two buyers make similar offers and one of the two has pre-approval, the buyer is much more likely to settle with the pre-approved buyer rather than wait for the other to settle his finances.
Know your price limit
Before you go into the negotiations, you must know what your price limit is, and at what stage you will have to walk away from the deal. Settling on a price that exceeds your limit could result in financial difficulties in the future.
You must also have done your homework when it comes to your ability to continue to make repayments if current circumstances change or if interest rates rise.
Don’t assume that the listed price correctly reflects the market value. Be sure to do your research and understand the market value of the property in which you are interested.
Types of offers
An unconditional offer
The unconditional offer comes with no conditions and is a straight offer to buy. Offers that do not come with conditions often have greater appeal for the seller as there is no reason for the buyer to walk away from the sale.
Unconditional offers often have a timeframe for acceptance. When the offer is accepted the buyer must ensure that the funds are ready to make payment.
Conditional offer
When a conditional offer is made, the sale will only go through when the conditions of the sale are met. Typical conditions include the condition that the buyer obtains finance or completes building or pest inspections.
The seller does not have to agree to your conditions. If they are too severe, the buyer may reject them out of hand.
How to make an offer that the seller will take seriously
Make your offer in writing and make sure to point out that your loan has been approved. Don’t go in with your top offer. You need to keep something back for negotiated price enhancements.
After your legal representative has checked out the contract and when you are happy with the price, you may want to sign the contract and include a check for the deposit. Deliver this to the agent and the seller’s conveyancer. They must, by law, present the offer to the seller.
Never sign a contract until you have checked with your legal representative and you are happy with all the conditions. A signed contract is legally binding but an offer isn’t.
If you really like a property it is important to move with speed. Properties can move quickly and if you’re too late with your offer, you’ll be disappointed.
Successful negotiation of the purchase price
Unless you put in an offer at the listed price or more, you should expect the seller to negotiate. It is normal for negotiations to pass from buyer to seller before the final selling price is settled. If you’ve reached the price that you think is fair, signal to the seller that you won’t move or he may be tempted to continue to push you for more.
Tips for negotiating the best price
- Always be professional
- Set offer deadlines
- Don’t make demands
- Be willing to give a little
- You may not always get the price you want, so consider the conditions you can include to ease things up.
In Conclusion
Even if you don’t get the property you had set your heart on, there are plenty more out there. It often happens that the property you end up with is more suitable than the one on which you lost out.
