Buying at Auction vs Private Treaty
Once you’ve decided on you want to make an offer for a property there are two main methods to purchasing: auction and private treaty.
At auctions you’ll be bidding against other potential buyers, will have to make fast decisions and will generally know if you will own the home when the auction concludes. If you’re negotiating through a private treaty you’re negotiating the sale price with the vendor and the initial price is set by the market value of the property, not a price reserve. The process can take days or weeks longer than an auction.
Buying at an auction
Buying a home at auction is an exciting time - the crowd and competitive atmosphere means it’s easy to get caught up in the passionate bidding. Remember these tips:
- knowing your maximum bid is just one part of being prepared. Knowing how much each extra bid will cost you in weekly repayments can help you make the tough decision of whether to keep bidding or not.
- At an auction there is no cooling off period, the property is sold when the hammer falls.
- If you are worried about getting too emotional in the auction process you can make someone bid on your behalf, with your instructions to purchase.
- Ensure you know the conditions of the sale before you bid so you know when the property would settle,
- If the property is passed in and you’re the highest bidder you’ll have the opportunity to exclusively negotiate with the vendor.
If you're the successful bidder at an auction, you’ll have to sign the sale contract and a 10% deposit on the spot. Your solicitor or conveyancer will then carry out the research needed on the property and arrange the settlement date. When you buy at Auction there is no cooling off period.
Some buyers prefer buying through private treaty because it’s a slower, less emotional process than buying at an auction. Some buyers view it as a ‘fairer’ way to agree to a property price and conditions of sale. Keep these tips in mind if you’re going to buy through private treaty:
- You can take your time making bids on the property
- You can negotiate certain terms and conditions of the sale in your favor
- You can delay getting inspections and reports done on the property until after you’ve agreed on a price.
- Once you’ve agreed on a price to purchase the property there is a cooling-off period that depends on the state you live in.