Making an offer and methods of sale and purchase
A private treaty sale is when a property is offered for sale at a negotiated price. The pricing structure can be a single figure price or a price range with the top range not exceeding 10% of the bottom range. When an offer is received it can then be negotiated until a mutually acceptable amount is reached by the buyer and seller.
A seller can also use this method to go to the market without a price. This strategy is often used when insufficient data is available. Using this method helps the seller and agent gain valuable feedback from the buying public before setting a price. It is suggested this method is only used for a short 1-2 week period before setting an asking price.
A contract for sale under private treaty can also be subject to certain conditions being fulfilled within in a specific time frame. The most common conditions include but not restricted to:
- Subject to sale or settlement of another property
- Building and Pest Inspections
- Conditional upon finance approval
The conditions of a contract form part of the negotiation of the final agreed pricing between the buyer and the seller.
Once an agreement has been reached between the parties the buyer is served with Form 1 Cooling off papers (commonly referred to as a Vendor Statement). The time frame for cooling in South Australia is 2 days from midnight on the day of service and does not include weekends or public holidays.
The cooling off period is when the buyer has the opportunity to peruse the Form 1 Vendor disclosure statement to ensure they are 100% happy with the purchase.
Following the completion of the cooling off period and satisfaction of the conditions of the contract the buyer is bound to the contract and must pay a deposit. A settlement date will have been negotiated and the purchaser is obliged to follow through with the purchase.
Unlike for sale by private treaty properties sold by auction are not subject to any conditions and do not have a cooling off period. This means potential bidders need to complete an inspection of the property prior to auction day including building and pest inspections if they choose to. Auction contracts are cash unconditional so registered bidders are required to have their deposit cheque ready at the fall of the hammer.
Deposits are generally 10% of the final purchase price but can be negotiated with the seller prior to the commencement of the auction.
Contracts of sale detailing settlement dates and all particulars relating to the property are available for viewing not less than 3 business days prior to the auction day and must be on display at the business premises of the agent and on auction day. As a general rule this information will be available at the start of the auction campaign.
Buyers are advised to view this valuable information before considering registering to bid on the home. The agent will be able to answer any questions the buyer may have or alternatively the buyer can consult their conveyancer or legal representative.
Buyers can make a pre-auction offer to the seller via the real estate agent. If the seller chooses to accept the offer prior to auction day the contract of sale is generally under the auction conditions.
Prior to the commencement of the auction and based on feedback from throughout the campaign, the seller in consultation with their agent will set a reserve price, a price they are prepared to accept for the home. This reserve price can be negotiated between the agent and the seller throughout the auction. If the bids do not exceed the reserve price the home will be passed in or withdrawn.
If the property is passed in, the highest bidder has the opportunity to negotiate with the seller to arrive at a mutually agreeable price under auction conditions. Failing successful negotiations with the highest bidder the method of sale reverts to for sale by private treaty.
For Sale by Expressions of Interest or Tender
A no price marketing campaign for sale by expression of interest or Tender is similar to an auction campaign in that it offers a specific time and date for potential buyers to submit an offer.
The buyer has the opportunity to submit an offer in the form of a contract which will include the price they are willing to pay and any conditions of sale for example, subject to finance approval, settlements dates. Each potential purchaser must put forward their best and final offer.
On the closing day of the tender all offers are opened and presented to the owner for consideration. The owner may choose the offer that is of most interest to them. However if none of the offers are acceptable to the owner the property will be placed on the market for sale by private treaty.
For sale by expression of interest offers all the benefits of a no price marketing campaign similar to auction but enables conditional buyers to compete to win the property.
Buyers are made aware they must submit their best and final offer as they will only get the one chance to secure the property.
Contact us today for more information regarding the advantages and disadvantages of the different methods of sale available when selling your home.