Selling A House Or Apartment Via Private Treaty
A private treaty /private sale occurs when a property is listed for sale with an asking price. Interested buyers make an offer to the agent, who in-turn presents the offer to the seller.
The agent will negotiate individually with prospective buyers to achieve a sale as close to the price as possible.
Advantages of selling a property through private treaty
Opportunity for a quick sale
As soon as a private sale property goes on the market vendors can start to receive offers. Auction campaigns normally run for four to six weeks, but a popular property being sold via private treaty/private sale, can sell within a few days after hitting the market.
Greater flexibility
Allows more flexibility in determining the final price and negotiating with each buyer. Vendors with less time pressure may lean towards a private sale.
Time to negotiate
As the vendor you have more time to make a decision and negotiate the price and terms and conditions of the sale. As there is less emotion decisions can be made more thoughtfully.
More price certainty
Private treaty sale gives the vendor greater control over the final price. Unlike an auction which hands control to the market for the sale, a private treaty/private sale campaign gives the vendor more time to consider whether they will accept, decline or negotiate an offer.
Buyers often prefer this method as they know how much the seller wants
Privacy
Offers the opportunity for private negotiation of the price between the vendor, buyer and the agent, and enables the vendor to withhold sensitive information such as the sale price from the public.
Setting an asking price
The best way to set the asking price is in consultation with you real estate agent.
Your agent would have presented you with a market appraisal figure earlier in the campaign which is a good starting point. However, over the duration of the sales campaign, markets can shift, and prices can change.
Additionally, your agent has been hosting open homes and talking to potential buyers about the property and gauging interest. They are best equipped to help steer you on a suitable market led asking price.
Receiving offers and negotiating a sale price
Offers to buy your property will be presented in writing to your real estate agent. Your agent will then discuss each offer with the vendor to see if they want to decline, accept or negotiate.
The agent is a skilled negotiator and will continue to negotiate a price as close to the sellers asking price as possible.
If the vendor decides to accept an offer, a Contract of Sale needs to be signed by both the vendor and buyer and swapped between both parties to make it legally binding.
Either party can withdraw an offer before documents are signed.
Finalising the sale
If an offer has been accepted, the final step is to legalise the sale. Here’s a look at the 5 key steps to settlement.
Step 1: Exchange of contracts
The first step to legalise the sale is to exchange sale contracts. There will be two copies of the sale contract, one for you and one for the buyer. You each sign one copy before they are swapped or as it’s called in some states, ‘exchanged’. This process can be facilitated by your real estate agent, your solicitor or conveyancer. At the time of the exchange, the buyer will be required to pay a deposit, which is normally 10%, and this will be held in trust by the real estate agent or your conveyancer.
This step is important for a number of reasons:
- The buyer and seller are not legally bound until signed copies of the contract are exchanged
- There is normally a five-day cooling off period during which time the buyer can withdraw from the sale. This may have been waived, extended or reduced in your contract so it’s important to be aware of this
- Generally, a seller does not have a cooling off period, once the contracts are exchanged, they are normally bound to complete the agreement
Step 2: Prepare for settlement
The time between the contract exchange and settlement, varies, however the average time is normally six weeks which allows time for buyers to get their finances sorted, and for the seller to fulfil any special conditions that were outlined in the Contract of Sale.
For example, your contract may have stipulated that you need to complete repairs or maintenance on the property. You need to make sure these tasks are carried out before settlement day otherwise you risk being in breach of contract and the sale falling through.
Step 3: Pre-settlement inspection
As settlement day approaches, the new buyer will have the opportunity to inspect the property. Whilst these are not compulsory, buyers usually want to use this time to check nothing untoward has happened to the property since they signed the contract. It also enables the buyer to check that all outstanding jobs stipulated in the contract have been completed.
Step 4: Finalise the transfer documentation
On the agreed day of settlement, the seller’s solicitor or conveyancer will contact the buyer’s legal representative to ensure all conditions of the contract have been fulfilled. They will arrange for the balance of the loan to be paid off and the buyers home loan will be registered against the property title.
The seller’s legal team will make sure that all necessary property taxes, land transfer duty and water rates are paid and once everything is settled, the transfer documents will be completed and lodged with the land registration office in the relevant state or territory.
Assuming all goes to plan, the new buyer assumes legal ownership of the property and the keys can be handed over.
Step 5: Completion of settlement
The seller’s legal team will notify them when the change of ownership is complete and the lender will provide them with a summary of their loan repayment, interest and any penalties which were necessary to finalise the home loan debt.
And with those steps completed, the property is successfully sold, and the celebrations can begin!