&noscript=1 /> How To Negotiate A Private Treaty / Private Sale Property Purchase | McGrath
How To Negotiate A Private Treaty / Private Sale Property Purchase

How To Negotiate A Private Treaty / Private Sale Property Purchase

27/01/2021 | 3 MIN READ

Private treaty, also known as private sale, is the most popular method of sale right across Australia. Therefore, if you are looking to buy a property, you’ll most likely be purchasing it this way. To ensure you are prepared, here is a deep dive into this method of sale, how to make an offer and negotiate a successful purchase.

 

What is a private treaty or private sale?

As mentioned above this is the most common way of buying a home in Australia and it is when the home is for sale with a set price. Whilst it has a listing price, rarely does the property sell for this price. What normally happens is after a period of negotiation where offers pass back and forth between the seller and the buyer, they will come to a mutually agreeable price and the property will be sold.

 

Once both parties are happy, the Contracts of Sale are signed and a deposit of approximately 10% is made. This method normally offers a cooling off period; however, some sellers request the buyer waive the cooling off period as a condition of the contract being signed.

 

If there is a cooling off period, the buyer can complete the final legal, building and financial checks. Keep in mind if the buyer pulls out of the contract, they may lose a percentage of the deposit, so make sure you discuss all of this with your lawyer or conveyancer before you sign anything.

How to negotiate buying a house or apartment via private treaty or private property sale

Negotiating the deal is at the heart of this process. It’s a time-honoured tradition for discovering the market price. However, many of us feel at a loss when it comes to negotiation. Since most of us only buy a property a few times in our life, very few of us have had enough experience to become skilful negotiators.

 

Many buyers are uncomfortable with the process and while the vendor has the agent to negotiate for them, unless you are using a buyer’s agent, you’re at your own mercy.


All buyers need some negotiation skills so here are some basic principles. Keep in mind the art of negotiation is not just about getting the best prices, but also about creating the perception that your opponent has achieved the best result.

Step 1 Ensure you have pre-approval in writing from your lender

One of the key ways to successfully negotiate a sale is to show the vendor you are serious and that you are in a position to buy the property if they accept your offer.  Getting pre-approval in writing from your lender is key here.  

 

Look at it his way, if two buyers put in similar offers, but only one has their finance approved, the vendor is most likely to choose the buyer who can pay immediately rather than risking going with the other buyer whose finance may fall through. 

Step 2 Know the maximum amount you are willing to pay

Knowing how much you are prepared to pay for the property and what your walk away price is key here. You certainly don’t want to offer more than you can afford as this can create issues with your finances. 

 

You also need to make sure you’ve done your financial due diligence to ensure you can still afford the repayments if the interest rates change or you are unemployed for a period of time. 


Research is critical here. You need immerse yourself in the local property market to really understand what similar properties are selling for. As John McGrath says “you can still pay a premium if you don’t do your comparable sales research properly. Never assume the asking price accurately reflects the value in today’s market!”


To find out exactly what to look for and where to find the information read our article How to Research the Real Estate Market.

What are the different types of offers you can make?

A conditional offer

A conditional offer is when a buyer makes an offer on a property that is contingent on something getting done for the purchase to go through. Conditions may be subject to the buyer getting finance approved, completing a pest inspection and building inspection or the sale of a property. 

 
Conditions are negotiable so when working out your conditions keep in mind the seller doesn’t not have to agree and if the conditions are extreme, the seller may reject your offer no matter the price.

An unconditional offer

As the name suggestion, offers are made without any conditions attached and represent an outright offer to purchase the property.


Unconditional offers can be more appealing to vendors as they know there won’t be a reason for the buyer to pull out from the contract.


If making an unconditional offer buyers will usually include a time period for how long the unconditional offer is valid for. And when an unconditional offer is accepted the buyer will need to ensure they have access to the full amount required to pay the vendor.

Step 3 How to put in an offer so the vendor knows you’re serious

As John McGrath says in his book The Ultimate Guide to Real Estate, states “It’s better to start somewhere below your walk away price and move your offers upwards in small increments.  It’s important to keep a couple of concessions up your sleeve, both in price and your terms”. But don’t go unreasonably low either.


Put your offer in writing as this shows you are committed.


Make sure you highlight in your written offer that your finance has been approved.


If you want to take your offer to the next level and your legal team have reviewed the contract and you’re all happy with the conditions etc, consider signing it and attaching a cheque for the deposit and giving it to the agent, along with sending an email to both the agent and the vendor’s solicitor. They are legally bound to present your offer the vendor. 


This shows you are committed to the purchase and it can be very appealing to vendors. Keep in mind never sign a contract unless you have had the appropriate legal advice from your solicitor or conveyancer. An offer isn’t legally binding, but a contract is, so making sure you know what you are signing is paramount.


Depending on the market conditions, speed can be important. If you love a property and have done all of your due diligence, be ready to make an offer quickly as properties can be snapped up in a few days after hitting the market. 

How to successfully negotiate the purchase 

Unless you have offered exactly what the vendor has asked or have offered them more, you can expect the vendor will look to negotiate. The actual selling price is determined after a period of negotiation with offers passing back and forth until the vendor and buyer agree on price and terms.

 

John McGrath says “The key here is to give the perception of achieving the best result. When they believe they’ve achieved the best offer they can get from you, many vendors will accept your offer. It’s when they perceive that you’ve got more in you, that they tend to sit on their price.”

 

Our top six negotiating tips:

  1. Care but not that much
  2. Always be respectful to the vendor - it’s not personal
  3. Give your offers a deadline - get time on your side
  4. Avoid making ultimatums such as this is my top dollar - take it or leave it.  You leave yourself no room to move.” It is best to say ‘this is my offer’.
  5. Win - win negotiations are best so be willing to give a little
  6. If you can’t get your price, consider negotiating your conditions such as settlement, inclusion, releasing the deposit, early occupancy, repairs etc

A final word 

There can only be one successful buyer of a property and whilst you may have fallen in love with a place and be disappointed you have missed out, stay motivated. We see time and time again, buyers go on to find a more suitable property within their price range. And positively what we often hear is, “I missed out on a property a month ago, but you know what, the property we ended up buying is much better.

 

Other buying a house or apartment tools and information

Our house and apartment inspection checklists 

Process of buying a house or apartment

Buying a property by auction

Complete costs of buying a property 

 

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