If you are new to the real estate world, you should be made aware that there are several different ways to buy and sell a house. There are three main methods: selling at auction, sale by tender, or sale by private treaty. The last option is one of the most popular ways to buy and sell property.
Let's learn more about what selling by private treaty means and whether or not it's a good option for sellers and buyers alike. But first, we're going to offer context which can help you tackle the process with knowledge and confidence.
3 different ways to buy real estate
There are different ways that people buy and sell real estate, though some methods are less common. The three main methods that most people might already be vaguely familiar with include:
- Buying private sale treaty: This is the most common method, where the property is advertised and bought, usually with the help of an agent.
- By auction: Some people buy houses through auctions, where you must be a registered bidder to participate during the auction day.
- Sale by tender: According to the Queensland government, "you invite potential buyers to submit an offer ('tender') for your home."
While there are benefits with each method, there are a number of separate advantages that can be seen through selling or buying a house through a private sale treaty. An interested buyer should be aware of this popular way of selling a house and sellers will benefit from being educated on the private treaty property sale method.
Advantages of a private treaty sale
A private treaty sale is when a real estate agent adds the property to their listings at a set asking price. Interested parties can put in offers, and the seller can consult their team to find the perfect buyer. There are some benefits that sellers and buyers can obtain from going the private treaty sale route including:
- Longer timelines: You are likely to have more time to get inspections and other necessary things done before the closing date. This can alleviate some stress and allow you time to review the documents in detail before making a decision.
- A simpler process: While some people have a lot of experience in buying real estate, others might not be as well versed. In this case, a private treaty could be the best option because you can work with a professional real estate agent team who can guide you through the process. Sometimes other methods can be confusing for first time buyers and sellers.
- Increased flexibility: There is some room for flexibility because your real estate agent and the other party's team can work together to agree in most cases.
- Greater control: Private treaty is one of the best ways to stay in control of the sale as the seller, all while working with a professional team to find the best choice.
A private treaty sale could be an advantageous way to buy or sell a house, but there are some legal things that you must know. Most of the agreement is covered in the sale contract that your real estate agent and banker will likely consider.
How to negotiate a sale
If you decide to buy or sell the property by private treaty, you will want to know how to negotiate the correct sale price for your goals. We'll detail a few tips and tricks for both parties, but you can work with your real estate agent, who has more experience and can offer some valuable advice. Here are some things you can do during the negotiation process:
- You'll list the price at the top of your desired price to leave room for negotiation. If the buyer offers under the listing price, you will still make a profit if you list it slightly higher than you're willing to accept.
- Speak with your real estate agent to see the competition and how your listing compares.
- Don't take your first offer from a prospective buyer, as a good rule of thumb.
For the prospective buyer:
- Before getting started, be sure that you have pre-approval in writing from your lender.
- Set your budget beforehand and know how much you are willing to pay.
- Know the types of offers you can make. They include:
A conditional offer: The purchase is contingent upon a particular factor being done before it goes into effect. These are negotiable.
An unconditional offer: You may have guessed this one does not rely on any conditions before closing the deal.
- Put in a written offer so the seller and their team know you are serious and committed.
- Work with your real estate agent to find the best negotiation tactic for your particular situation.
Negotiating can be a tricky process at first, but doing so through a private treaty is usually easier for first-timers than an auction negotiation. In a private treaty, you have more time to make the right choice and find the right tactic to secure the sale.
Steps to buying a house through a private treaty
Now that you understand what a private treaty is, it's time to better grasp the process of how it works. Here is a basic breakdown of the steps involved when buying a house through a private treaty:
- Make an offer on a property: The potential buyer will make an offer on the property, and the negotiation process begins.
- The seller responds: Sometimes, the seller will accept the offer or come back with a counter-offer or completely decline it.
- Cooling-off period: Once an agreement is made and the offer is accepted, the Queensland-required five-day cooling-off period begins.
- Pre-settlement property inspection: The property must be inspected to ensure that it's in the expected condition before the final settlement.
- Settlement: The settlement day is when the final contract is signed, and the transaction finalised. The Queensland government says that it usually takes 4-6 weeks to settle after both people sign the contract. Then the deal is done!
Most people buy houses through private treaties because of the flexibility and support they can get from their real estate agent in the process. However, even if you decide to buy or sell a house using another method, it can be helpful to consult real estate professionals.
If you are ready to get started, reach out to the experts at Ray White Surfers Paradise today.