Helpful Handy Tips for Buyers
Negotiating a deal can be one of the most disconcerting aspects to buying a home. Negotiation strategies will differ according to whether you purchase a property through:
- Private treaty sale
When your offer/bid is accepted you may need to immediately:
- Pay a holding deposit
- Start the conveyancing process.
Private treaty sale
Private treaty sales occur when property is purchased through an estate agent or directly from the owner. If you intend to buy a house through this process you must agree to pay a specific price set by the seller.
If your offer is accepted, make sure you obtain written acknowledgement of this fact. This will involve both parties signing a Contract of Sale. The contract will set out the agreed price and any terms and conditions, e.g. subject to a satisfactory building inspection and finance. Upon signing a contract you are likely to be asked to pay a holding deposit.
It is then time to start the conveyancing process and finalise. If you haven’t already conducted an inspection, arrange immediately.
The rule for auctions is to be prepared. If you are going to bid for a property you must have conducted an inspection and have a loan approval in writing prior to the day of the auction. This is because the contract conditions are generally set at the time of auction and you will not be able to stipulate your own conditions, such as purchase being conditional on the sale of an existing property.
*Handy Tip! – Get copies of all relevant documentation from the agent selling the property prior to the auction. Read over this documentation and consider having it assessed by your solicitor.
If you are the successful bidder you will have to sign the contract immediately after the auction and will not be given the opportunity to formally review the terms and conditions. The only area for negotiation may be the settlement date.
Whether the auction is being held in a real estate agent’s auction room or on-site, the process is the same. The auctioneer starts proceedings with a short explanation of the contract and terms of the auction. Buyers may ask questions at this stage. The auctioneer will then ask for an opening bid. If a genuine bid is not forthcoming the auctioneer, vendor or another agent may make an initial bid.
It is legitimate for the vendor to bid. Likewise the auctioneer can bid on behalf of the vendor as can an agent on behalf of a buyer. The auctioneer is likely to announce a series of artificial bids if there are no other bids made. The reserve is the minimum selling price set by the vendor prior to auction and can be changed during the auction process if desired.
Once the reserve price is reached the auctioneer will generally state that “the property is on the market” or words to that effect. Once the reserve price is met, serious bidding will begin if there are genuine bidders present.
If the final bid falls short of the reserve, the property may be passed in. You may then enter into negotiations with the agent, by approaching him/her immediately following the auction. Alternatively, the vendor may agree to sell at this lower price, at which time the property is said to be ‘on the market’ and the auctioneer may attempt to extract more bids prior to making the sale.
*Handy Tip! – It is a good idea to attend several auctions prior to participating in one. This will help you get to know the process and allow you to feel more comfortable on the day. If you are looking to buy in a specific area, try to attend auctions within that same area. This tactic will help you to assess the current market value of the area.
Note that you will usually have the opportunity to make an offer on a house before its auction date. The agent can tell you the price the property is expected to reach at auction, but keep in mind that it is likely the agent will lower the reserve figure somewhat in an effort to get you to attend the auction.
Pay a holding deposit
Payment of a holding deposit occurs once the vendor accepts your offer/bid in writing. There is no legal requirement to pay this deposit, but it has become an accepted act of good faith by the buyer.
The holding deposit can be anywhere between a couple of thousand to 10% of the total purchase price. This deposit is refundable in full should the sale not proceed. (Please note that Western Australia does not have a cooling-off period.) The balance, i.e. the difference between the agreed price and the deposit, should be paid upon settlement when you take possession of the property.
If you buy a house through auction, you will have to pay this deposit immediately. If however you purchase by private treaty, the deposit should be paid upon exchange, or signing of the contract, you may be entitled to up to seven days to pay the deposit.
Start the conveyancing process
Conveyancing involves the transfer of property ownership from one party to another. It is wise to employ a solicitor or conveyancer to perform this process.
If buying privately (i.e. not through auction), the conveyancing process begins with your lawyer or conveyancer examining the contract for sale prepared by the vendor’s representative. This contract should detail the:
- Property address
- Names of the parties (you and the seller)
- Selling price
- Terms and conditions
- Timing of settlement (when you take possession of the house)
- Your legal advisor is responsible for checking the details of the contract, ensuring it contains nothing detrimental to the purchase or intended use of the property, e.g. zoning conditions or title restrictions
- Once your advisor is satisfied with the contract, you will be ready to close the deal!