The agreement for the sale of a property at a price negotiated directly between the vendor and purchaser using the agent as the conduit.
A vendor selling property through a private treaty typically sets a price, or price range, they wish to sell for based on a range of factors, including recent comparable sales in the neighbourhood.
The agent should advertise the property effectively and with diligence and conduct ‘open for inspections’ during which potential buyers can inspect the property.
Unlike auctions or expressions of interest sales, private treaty sales usually don’t have a set date by which the property is to be sold.
The way in which a property’s selling price is advertised can vary. Searching through ads on property websites and in print media you’re likely to see one of the following;
- A set advertised price, eg. $450,000
- A price range, eg. $440,000 – $460,000
- An ‘offers over’ invitation, eg. ‘Offers over $440,000 considered
- An invitation to contact the agent to discuss the price
- An invitation to negotiate, eg. “By negotiation”
Positives of buying through private treaty;
- As a potential buyer you won’t need to worry about the conditions and pressures of buying at auction, which can be intimidating if you haven’t been through the process or your agent hasn’t sat down with you to discuss how they work.
- Unlike an auction, where offers below the set reserve may or not be accepted by the vendor, you can put in an offer below the asking price and negotiate as necessary with the vendor from there. There is generally no specific time limit for this negotiation but the longer a negotiation takes the less likely of a positive outcome.
- You have the option to put in a conditional offer, such as an offer subject to finance or a building and pest inspection.
- Private sales are also subject to a ‘cooling off period’ which means that even though you’ve signed a contract you can, for whatever reason, change your mind and withdraw from the purchase within a set time period of 5 business days. There is a penalty of 0.025% of the purchase price that is payable.
Negatives of selling through private treaty;
- Selling by private treaty can often take longer than going to auction which may be an issue if you’re under pressure because you need to move from your current property due to many different reasons, personal or professional.
- Generally, you are negotiating in the wrong direction…downwards and in a tight market where buyers can be scarce this gives the buyer the upper hand when in negotiations.
- As a buyer you are also at risk of being drawn into a non-transparent negotiation process among multiple purchasers, which can lead to an increased price