Sale by Private Treaty requires the seller to set a price they wish to achieve, at the beginning of the campaign. The vendor often sets the asking price based on recent property sales in their area similar to their own property.
This is then listed with a price to the public. Your Real Estate Agent can help you with this process. Many occasions, sellers have a tendency of setting a higher price at the beginning, thinking buyers are likely to negotiate the price down. Doing this can be detrimental to the sale, so an experience agent becomes an important source of information.
Sale by Private Treaty gives the seller control over the sale, you have time to consider the offers and conditions of sale. “Private” means the buyers do not know what other buyers offer and can sometimes put a little pressure on them to place their “best offer”
Private Treaty sales allow the buyer to have a “cooling off” – 2 clear business days to consider their purchase.
The property is advertised for a certain number of weeks with a future date for public sale. The buyer does not have a “cooling off” nor can they have any ‘subject to’ clauses. The first step in selecting the right auctioneer is to choose someone with a proven track record and knowledge of the particular area. In most cases, you will have already entered into a Sales Agency Agreement with an agent who will act on your behalf in marketing the property prior to auction.
You have the right to set the reserve price, so you can be assured that the property can’t be sold at less than this price. Remember to be realistic when setting the reserve price, bearing in mind supply and demand in the area as well as other general market consideration.
Selling before the Auction
It is not uncommon for interested buyers to make offers on properties prior to auction day. In such a case the agent will discuss the offer with the vendor, and a decision is made to either consider the offer, or continue with the auction as planned.
In the event the vendor wishes to sell their property prior to auction, the agent will generally, o the vendors instructions, invite all potential buyers to also make an offer. The most appropriate offer is then accepted by the vendor, and contracts are signed prior to auction date – wavering their cooling off in front of a solicitor.
On the day of auction – what happens?
It is natural that auction day can cause some anxiety for buyers and vendors. You can minimise this stress by understanding the process and procedure. It’s important your Agent guides you through the process and you are clear and agree on the process of your auction day. Things like “Reserve Price” and whether you wish your Agent to Vendor bid on your behalf – these are critical and have legal implications. Don’t be afraid to ask questions.
- At least 30 minutes before the auction, your agent is required by law to display documentation regarding the property. This can also be viewed at the Agents office 3 days prior to the Auction Day.
- The Auctioneer will announce some legal details and information you are required to know.
- Opening Bids: The auctioneer will then ask for an opening bid, setting an amount by which all bids must rise; alternative amounts can be bid – however this is up to the Auctioneer’s discretion if the amount is accepted.
- Once the “Reserve Price” has been reached the property is considered to be “on the market” and will be sold to the highest bidder and the Auctioneer will conclude a binding contract between the purchaser and the seller.
- If the highest bid has not reached the reserve price the auctioneer will usually ask the seller’s instructions before passing the property in. If the highest bid does not reach the reserve price and the property is passed in, the auctioneer will discuss whether you would like to negotiate with the highest bidder. Otherwise the seller has the option to pass the property in.
If you are the lucky purchaser on the day, then an immediate deposit – usually 10% of the purchase price is required after the auction. The balance is paid on settlement, normally set by the seller at 30, 60 or 90 days. It’s important to note that being flexible with the length of settlement to suit your buyer can help sell the property.
The sale finalises when the contract has been signed by both seller and buyer and all the relevant cheques and transfers have been made.