There are two ways residential property is sold in Australia: via auction or private treaty sale.
While auctions grab the headlines and make great fodder for reality TV, private treaty sales are the most common way property is sold. If you’re about to embark on the process of being a private treaty buyer, here’s what you need to know.
Private treaty sales are the most common way property is sold. Picture: Getty
What is a private treaty sale?
A private treaty sale is where the seller sets the price they want for their property; generally after research into the market and discussions with their agent to determine the most realistic outcome. They then start negotiating with potential buyers via their agent.
Once a price is agreed, the buyer lodges a deposit and, in most cases, the process will enter a cooling-off period. You can still back out at this stage, but may have to forfeit some of your deposit, depending on which state the purchase is being made in.
There are pros and cons of buying private treaty.
Upsides include the ability to negotiate price and terms and have time to do investigations, while on the flip side, it’s not a 100% transparent process, because you can’t see the other bidders in the room.
Private treaty sale vs. auction
Lachlan Walker, director of Place Advisory and Place Projects in Brisbane, explains the key differences between private treaty sales and auctions.
Private treaty sale
- The seller sets the price they want to achieve for the sale, then can start negotiations with interested parties;
- While you are unaware of the other bidders in the process, private treaty sales give you the time and flexibility to negotiate on price and term;
- Cooling-off periods give you a window to walk away from the sale, but at a possible cost.
Auction
- The seller sets a minimum (reserve price) before the sale, then the potential buyers set the final price through a competitive process;
- The bidding process is completely transparent. You are immediately aware of what other potential buyers are prepared to pay;
- No cooling-off periods. Contract conditions have to be negotiated before the auction and these are considered to have been met (unconditional) once the auction is complete. This means longer settlements and smaller deposits are common in auction sales.
The auction bidding process is completely transparent. Picture: Kate Griffin
Private treaty sale process
Here’s what the private treaty process generally looks like.
- Price is set and marketed by seller;
- Inspections held and prospective purchasers do investigations;
- Offer is made by the buyer;
- Negotiation between parties to reach an agreed price;
- Contracts are issued by solicitors or real estate agents and exchanged;
- Contract conditions are undertaken – for example, valuation, finance, building and pest inspections;
- Contract conditions are met (unconditional), the buyer pays a deposit and the cooling-off period begins;
- Settlement occurs, money is exchanged and the buyer picks up the keys.
Private treaty sales by state
The main variations between states when it comes to private treaty sales are in cooling-off periods and forfeiture fees.
All states with a cooling-off period have it end at 5pm on the final business day of the prescribed timeframe. Here’s what the differences look like, state by state:
1. Private treaty sale in NSW
- Cooling-off period is five business days from the day when both seller and buyer sign the contract;
- The seller may impose a fee of 0.25% of the purchase price if the contract is terminated during this period.
2. Private treaty sale in Victoria
- Cooling-off period is three business days from when the buyer signs the sale contract;
- The seller may impose a fee of 0.2% of the purchase price if the contract is terminated during this period.
3. Private treaty sale in Queensland
- Cooling-off period is five business days from the day when both seller and buyer sign the contract;
- The seller may impose a fee of 0.25% of the purchase price if the contract is terminated during this period.
4. Private treaty sale in South Australia
- Cooling-off period is two business days from when the buyer and seller sign the contract or when the buyer receives the vendor’s statement;
- If the contract is terminated in this time, any deposit over $100 must be refunded in full, while any holding deposits will go to the seller.
5. Private treaty sale in Western Australia
- No mandatory cooling-off periods in WA.
6. Private treaty sale in Australian Capital Territory
- Cooling-off period is five business days from the day when both seller and buyer sign the contract.
- The seller may impose a fee of 0.25% of the purchase price if the contract is terminated during this period.
7. Private treaty sale in Northern Territory
- Cooling-off period is four business days from the exchange of contracts.
- No forfeiture fees apply if the contract is terminated during this period.
8. Private treaty sale in Tasmania
- No mandatory cooling-off periods.
Source: https://www.realestate.com.au/advice/what-is-a-private-treaty-sale-and-how-can-you-buy/
