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What is a private treaty sale and how can you buy?

What is a private treaty sale and how can you buy?

There are two ways residential property is sold in Australia: via auction or private treaty sale.

While auctions grab the headlines and make great fodder for reality TV, private treaty sales are the most common way property is sold. If you’re about to embark on the process of being a private treaty buyer, here’s what you need to know.

What is a private treaty sale?

A private treaty sale is where the seller sets the price they want for their property; generally after research into the market and discussions with their agent to determine the most realistic outcome. They then start negotiating with potential buyers via their agent.

Once a price is agreed, the buyer lodges a deposit while in most cases the process will enter a cooling-off period. You can still back out at this stage, but may have to forfeit some of your deposit, depending on which state the purchase is being made in.

There are pros and cons of buying private treaty.

Upsides include the ability to negotiate price and terms and have time to do investigations, while on the flip side, it’s not a 100% transparent process, because you can’t see the other bidders in the room.

Private treaty sale vs. auction

Lachlan Walker, director of Place Advisory and Place Projects in Brisbane, explains the key differences between private treaty sales and auctions.

Private treaty sale

  • The seller sets the price they want to achieve for the sale, then can start negotiations with interested parties;
  • While you are unaware of the other bidders in the process, private treaty sales give you the time and flexibility to negotiate on price and term;
  • Cooling-off periods give you a window to walk away from the sale, but at a possible cost.

Auction

  • The seller sets a minimum (reserve price) before the sale, then the potential buyers set the final price through a competitive process;
  • The bidding process is completely transparent. You are immediately aware of what other potential buyers are prepared to pay;
  • No cooling-off periods. Contract conditions have to be negotiated before the auction and these are considered to have been met (unconditional) once the auction is complete. This means longer settlements and smaller deposits are common in auction sales.

The auction bidding process is completely transparent.

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