Welcome to Property 101. If you are looking to purchase property, it’s really important to understand the different sale methods and in turn, the different ways to buy property. Two of the most common sale methods are Private Treaty and Auction. In this blog we’ll compare Private Treaty Versus Auction and the advantages and disadvantages of each method.
Private treaty allows for negotiations to take place between the buyer and seller (vendor), while auctions involve competitive bidding to purchase the property. In this blog, we’ll explore the advantages and disadvantages of both private treaty and auctions, as well as provide advice for both clients of Templeton Property and any one else looking to buy real estate.
What is Private Treaty?
Private Treaty is a term used in the world of real estate to describe the process of buying or selling a property outside of a public auction. When you buy a property by private treaty, you negotiate the price directly with the seller or their agent. This differs from an auction, where buyers bid against each other either at the property, online or at an auction venue, until the highest bidder secures the property.
Advantages of Buying by Private Treaty
- More time for due diligence: When buying by private treaty, you have more time to conduct the ever important due diligence on the property before making an offer. You can arrange for building and pest inspections, finance approval, body corporate searches, council approval checks and obtain legal advice before committing to a purchase. This sales advice for real estate can help you make a more informed decision when purchasing a property.
- Less pressure to act quickly: Private Treaty sales can often have a negotiated longer settlement period than auctions, giving you more time to organise your finances and arrange for a smooth settlement.
Disadvantages of Buying via Private Treaty
- Limited transparency: The negotiation process can be opaque and you may not know whether other buyers are also interested in the property. This can make it difficult to know if you are paying a fair price. Seeking sales advice for real estate from a professional like a Buyer’s Agent can help you ensure that you are paying a fair market price for the property.
- Negotiations can fall through: As you are negotiating directly with the seller or their agent, there is a risk that the negotiations could break down and occasionally, the property may be taken off the market altogether.
What is an Auction?
An auction is a public sale where buyers bid against each other to purchase a property. The property is sold to the highest bidder once the reserve price is reached and contracts are usually exchanged on the same day as the auction.
Advantages of Buying at Auction
- Transparency: Auctions are transparent as all buyers are bidding openly and can see the offers made by other buyers. This helps to ensure that you are paying a fair market driven price for the property. This transparency can be helpful for buyers who are concerned about overpaying for a property.
- Certainty: If you are the highest bidder at an auction and the reserve price is met, the property is sold to you on the day. This gives you certainty over the purchase and can prevent any further negotiations or counter offers. This sales advice for real estate can be useful for those who want to avoid lengthy negotiations.
Disadvantages of Buying at Auction
- Limited time for due diligence: As auctions have a fixed date and time, you have a limited period to conduct due diligence on the property before the auction. This can make it challenging to obtain legal advice, organise building and pest inspections and obtain and review flight paths, flood search, body corporate searches, council approvals etc.
- Competition: Bidding at an auction can be competitive, and there is a risk of getting caught up in the excitement of the moment and paying more than you had planned. Additionally, there may be other buyers who are willing to pay more than you are, which can be disappointing if you are unable to secure the property.
Both private treaty and auctions offer their own unique advantages and disadvantages when it comes to buying property. Private treaty allows for more time to consider the purchase and negotiate terms, while auctions offer the excitement of competitive bidding and the price being set by the market on the day. Ultimately, the decision on which method suits you to purchase via will depend on your risk tolerance, the advice from your financier and the chosen method by the owners who are selling the property you with to purchase. At the end of the day, being able to purchase via either method will allow you to consider the largest number of properties in the market and improve your chances of finding you dream property.
If you are considering purchasing a home or investment property in Brisbane or South East Queensland and would like the assistance of an experienced Brisbane Buyer’s Agent that can help you find the perfect property, that meets all your requirements for the right price, please don’t hesitate to contact us.
We look forward to hearing from you.
Sam Price, Buyer’s Agent and Director – Templeton Property.