What Is A Private Treaty Sale?

What Is A Private Treaty Sale?

A private treaty sale is a common method of residential property transaction. In this process, the seller determines the price for which they wish to sell their property, and their real-estate agent negotiates with potential buyers to secure a sale close to this price. Both the buyer and the seller have the freedom to negotiate until mutually agreeable terms are reached.

How Does A Private Treaty Sale Process Work?

• With a private treaty, the seller or vendor first sets a price range for the property when they list it for sale on the market.
• The marketing for sale begins. This may include dressing up the property for pictures, paying for paid listings on real-estate websites and newspapers, and arranging open houses for inspection by potential buyers.
• Prospective buyers are then free to make their offers through the real-estate agent or directly to the owner and negotiate on the price and terms of the sale, common requests from buyers include a subject-to-finance clause and a building inspection clause.
• Sellers are free to consider offers from as many prospective buyers as they wish, and keep the property on the market for as long as they want, unlike at auctions, which have a set date.
• Once the owner accepts an offer, a contract of sale is written, signed and exchanged.
• Next, a deposit will need to be made, after which the cooling-off period begins. During the cooling-off period, a purchaser can choose to withdraw from the contract for any reason. In New South Wales, this period usually is five days.
• Most buyers do a final inspection prior to settlement to ensure that everything is in order and in line with the contract of sale. The settlement is finalised.

Auction vs Private Treaty Sale

A vendor (seller) almost always wants the best price for their home or property. If there is great interest in the property, an auction is their best bet for getting the best price. But the seller may also have other considerations. The vendor may want a fast sale, perhaps because of divorce or because they’ve already had their own offer to purchase a property accepted elsewhere. These are factors beyond price that affect a vendor’s willingness to negotiate.

There are downsides to auctions as well. They usually require an expensive advertising campaign. Then there’s the uncertainty of the final auction price. Finally, by their very nature, auctions are a public affair and many vendors prefer to keep their sale private. If you’re interested in learning more about auctions and what buyers need to be aware of participating in them, we have a Home Buyers Course that covers this topic in great detail, including two real-life case studies.

What Are The Benefits Of A Private Treaty Sale For A Buyer?

For buyers, a private treaty sale offers the chance to negotiate price and terms. For example, if a buyer hasn’t secured financing for the purchase, they can negotiate for a subject-to-finance clause. Also, buyers can also make offers that appeal in different ways. For example, a buyer could make an offer that’s 10% lower than the asking price but with a subject-to-finance clause.

Alternatively, the same buyer could make an offer that’s 5% less than the asking price but without any clauses. These offers appeal to vendors in different ways. One who’s looking for the best price may be willing to accept a few clauses, whereas a vendor looking for a quick sale might accept a lower offer but with no clauses in the contract of sale. Learn how to make an offer on a house below asking price. Private treaty sales also generally have a cooling-off period, during which the buyer can walk away for any reason. This is ideal for first home buyers as there is no cooling-off period for sales at auctions.

5 Tips When Buying A House By A Private Treaty Sale

• Learn to negotiate: The asking price is to be used as a guide for how much the owner is willing to accept for a property. The asking price is almost always higher than the price they’re willing to accept. That is to say, it’s negotiable. You should almost always offer less than what you’re prepared to pay. However, please be careful not to go too low, as you risk getting declined. Never reveal the maximum amount you’re willing to pay straight away. Instead, work your way up incrementally with the vendor.
• Research and then research some more: You can never be certain you’re paying a fair market price unless you’ve done your research. This can be as simple as looking at recent sales of comparable properties in the area. You can learn more about how to value property here. Also, finding out why the vendor is selling can help tremendously in your negotiations. Talking to neighbours after the open home can give you great insights into the property and the area.
• Set your terms and conditions: When you submit an offer, you have a chance to include conditions for the sale. For example, it could be a subject-to-finance clause, or it could be that the owner needs to fix a certain part of the home. Getting these in writing is vital, to avoid problems on the settlement date. However, be aware that vendors do not like too many conditions and may even reject offers due to them. Tip: Some vendors are looking for a quick sale. That is to say, in addition to a good price, a quicker settlement date could also be a deciding factor for vendors.
• Don’t get too emotional: While private treaties aren’t as emotionally charged as auctions, homebuyers still tend to get emotionally invested in homes they like. This makes it difficult to negotiate a fair price for the property. Leaving your emotion out of things will help you better negotiate with the agent and potentially avoid going over budget. Being prepared to walk away gives you better leverage.
• Do your due diligence: Researching the area and the property, taking care of the legal side of things, and ordering a building and pest inspections are all part of doing your due diligence. Doing your research on the area and the property using recent, comparable sales will help you decide how much you should offer. It can help you understand whether the property is fairly priced or overpriced. They’re almost never underpriced.

No.1 Mistake To Avoid When Buying By A Private Treaty Sale

When enthusiastic prospective homebuyers find a property they like, they tend to put in an offer immediately. Many are in such an unbelievable rush to buy that when they call us, they’re almost breathless. The problem is that a lot of them don’t have a home loan pre-approval and they need it fast. What they forget is that banks receive a lot of applications, especially the major ones, so approvals can take some time, even for the strongest borrowers. On top of that, lender policies can change quickly and without notice, which can make it harder to get a home loan. Or it could just be that the loan amount you qualify for is significantly less than you thought.

When you consider that a pre-approval strengthens your position to negotiate, it’s almost always better to get a pre-approval before you make an offer. To get pre-approved, please speak with one of our specialist mortgage brokers by calling us on 1300 889 743 or by filling in our online enquiry form today.