The home buying process – different methods of sale
Wednesday, 5 August 2015
- There is no asking price, and instead, best offers are invited
- Offers are to be made during the ‘Tender Period’ (i.e. before a cut-off date set by the seller)
- There will either be acceptance or rejection of an offer, or further negotiation
2. Buying off plan
- This is basically signing a contract to purchase a home that is yet to be built
- It usually involves buyers viewing plans or model of the home to be built
- Stamp duty is only payable on the land component of the purchase
3. Public auction
- There is normally 3 or 4 weeks of marketing prior to an auction
- There is a Reserve Price – set by the vendor (seller) as the minimum price at which they will sell
- Announced through the auctioneer, the vendor may bid up to the reserve price
- If the property doesn’t sell on auction day it will revert to a private treaty sale
4. Private treaty
- 'Private Treaty’ is the Real Estate term for a sale ‘By Negotiation’
- An asking price or price guide is quoted
- For price range guides (eg $400,000 - $420,000), the highest price must be within 10% of the lower price.
The two most common of these methods are ‘public auction’ and ‘private treaty’.
The amount you offer on a property will likely be the most significant factor in determining if your offer is successful. There are some other factors you also need to consider:
The offer may be subject to certain conditions, such as finance. If a condition is not met within a certain timeframe, you will not be bound by the contract*. A contract with no conditions is known as ‘cash unconditional’ – this is ideal for the vendor.
On the settlement date, ownership officially changes. Settlement periods of 30 to 60 days from signing the contract are most common. The vendor may indicate they require a short or long settlement.
If your offer is accepted you will have to pay a portion of the purchase price up front. Traditionally this is 10% of the purchase price, although smaller deposits are common. If you cannot meet the conditions of your offer, your deposit will be returned*.
A contract formalises an offer. Once a contract is signed by both the vendor and Purchaser, it is binding upon both parties. Once a vendor signs a contract they do not get a cooling off period. As a purchaser in South Australia you do – two clear business days from the issuing of both the contract and a ‘Form 1’.
The ‘Form 1’ is a separate document which discloses the particulars of the property, allowing you to make an informed decision as to whether you wish to proceed.
*Return of deposit and release from a contract is subject to the terms, conditions and clauses of that specific contract. You will have certain obligations. Independent legal advice should be sought prior to entering into any contractual agreement.
Auctions can be exciting, scary and emotional. So you don’t get carried away when you’re bidding, it can be a good idea to set a firm price limit and stick to it.
There are two important differences between an auction and a private treaty purchase:
- There is no cooling off period when you purchase at auction – the ‘Form 1’ is made available to you for three clear business days prior to the auction so you can make an informed decision as to whether or not you wish to bid.
- Bids have to be made on a ‘cash unconditional’ basis i.e. you cannot bid subject to certain conditions being met (e.g. subject to finance). If you wish to have a building inspection you will need to do so before the auction. If you are taking out a loan, you have to be assured you have your finance arranged before bidding.
Typically, properties going to auction have a standard 30 day settlement period and require a deposit of 10% of purchase price payable upon the fall of the hammer. If you wish to vary either your settlement date or deposit amount, you must arrange this and have it approved through the agent prior to the auction commencing.
Properties going to auction have a reserve price i.e. a price below which they will not sell. For a property to be purchased at auction, the highest bid has to be at or above the reserve price, although the Vendor can amend the reserve price during the auction. If a property doesn’t sell at auction, it will usually revert to a private treaty sale afterwards.