Are you planning on buying a property in the near future? If so, it certainly pays to have a little know-how when it comes to the pros and cons of buying at auction versus purchasing via private treaty.
In fact, both options have their benefits and their drawbacks, so it pays to understand how they both work and what you need to consider when purchasing your investment.
While sometimes you may have a choice about which path to take, quite often you will have very little pulling power or none at all regarding how a property is sold. So it’s essential you know what’s what.
PRIVATE TREATY – WHAT YOU NEED TO KNOW
‘Private treaty’ simply refers to the process in which the home buyer and vendor meet on an agreed price and is the most common property transaction process used in Australia.
Once the home buyer and vendor have agreed on a price, a Contract of Sale will be exchanged.
This contract will outline the terms and conditions for the sale and will detail any special sale conditions, required deposit fee and length of the settlement period.
It is important to have the Contract of Sale reviewed by your legal representation to ensure from the outset that there are no elements that may work against you – or even that might be illegal. From this point, your solicitor should be involved at every stage of the purchase process.
After both parties have agreed on the terms and conditions detailed and the contracts have been exchanged, a settlement period of four to five weeks will follow. The length of this period can be negotiated by the parties.
It is important to examine and assess the property with a real estate agent or legal adviser just prior to settlement to ensure all details of the property are accurate, no fixtures and fittings included in the contract have been left out, and that there are no other nasty surprises.
AUCTION – WHAT YOU NEED TO KNOW
Unlike purchasing a property via private treaty, an auction is a public event at which multiple home buyers bid against each other to secure the best price for the property.
An auctioneer will oversee the bidding until the amount offered by the highest bidder is acceptable to the vendor.
If the highest possible bid is deemed insufficient by the vendor, the property will be ‘passed in’ and the property will remain on the market.
An auction is a fast paced and exciting way to purchase a home, but there are several issues of which you need to aware.
It may be difficult not to get caught up in the heat of the moment, but when attending an auction it is vital that you know your limits and do not over commit on price. Remaining clear headed and in control is essential.
If you have made a bid which has been accepted by the vendor, contracts will be exchanged immediately and you will be required to pay a deposit.
There is no ‘cooling off’ period when purchasing a property via auction, so be sure to assess the property, including having building and pest inspections done, prior to attending.