Buying a home is typically one of the biggest decisions in your life, so it’s worth being well prepared and understanding the buying process.
Whether you're looking seriously to buy for the first time or you’re on the hunt for your next home, before you start pounding the pavement or raising your hand, some things you may like to consider are when you need to have your deposit ready and whether you might apply for pre-approval for a home loan.
Once you know how much you may be able to borrow and your budget, you can navigate the different ways to buy a home. Two of the most common methods in Australia are by private sale and auction.
When a property is being sold by private sale (or private treaty), a price or range is set by the seller. Private sale is typically more flexible than an auction. You can put in an offer and then negotiate the price directly with the seller’s agent. Here are some of the upsides of buying by private sale as well as some things to be cautious about.
No fixed timeline
With a private sale you generally have time to negotiate the sale price without the stress and deadline of an auction. You also have breathing space to finalise your due diligence, pest and building inspections, and finance too.
If the property has been on the market for a while, or there is little interest, it can be an opportunity to put in a lower offer.
You can make an offer dependent on certain ‘conditions’ being included in the Contract of Sale. For example, an offer could be conditional on a valuation, finalising your home loan, or pest and building inspections. You can negotiate settlement dates too.
After signing the contract, depending on the state you are buying the property in, there may be a cooling-off period of up to five days. During the cooling-off period you can withdraw from your contract of sale – though this may incur a fee. You should consider getting a solicitor or conveyancer to review the contract of sale before you sign.
With a private sale, other buyers can put in offers too. Unlike an auction, you don’t know how many other buyers there are or what they’ve offered.
The price isn’t fixed
Often private sale homes are sold after a number of offers and not for the listed sale price. Considering the value of similar properties may help you determine how much to offer. To get a comprehensive insight into a particular property and suburb, you can request a free ANZ Property Profile Report.
Although there is no immediate deadline, depending on the property market and the popularity of the home, you may still have to move quickly.
Even if your offer is accepted, either party can withdraw from the sale until contracts are exchanged. There is risk of getting ‘gezumped’ during this period, for example, if the owner decides to sell to another party with a higher offer.
Quick private sale checklist – things to consider
- Find out what the offer process is, as this can vary between states and territories, and even between real estate agents.
- Do you have your deposit ready?
- Do you know your budget and price limit?
- Consider applying for pre-approval before making an offer.
- Know the value of similar homes on the market.
- If you want to make an offer, consider what conditions you need to include.
- Consider whether to get a pest and building inspection carried out before you sign contracts, or include it in your conditions.
- Consider settlement dates in the contract.
- Consider asking your solicitor or conveyancer to check the Contract of Sale and conditions before signing.
- Once you’ve signed, consider whether a cooling off period applies.
With an auction, the seller agrees a minimum reserve price with their agent before the property goes to auction. On a fixed date and time, and conducted by an auctioneer, potential buyers will bid against each other for the property. If bidding reaches the reserve price or beyond, the property is sold to the highest bidder. Contracts will be signed, exchanged and a deposit paid immediately after the auction. Here are some of the upsides of buying at auction and as well as what to be cautious about.
During an auction, bids are transparent so you know what amount your competitors are bidding. There’s less risk of offering much higher than other interested parties.
The final sale price is driven by the buyers and competition on the day rather than being dictated by the seller (provided the property passes the minimum reserve price).
During the auction, if the reserve isn’t met, but you were the highest bidder, you get the opportunity to negotiate with the seller first after the auction.
If you are the highest bidder, and the reserve was reached, you will sign and exchange sale contracts there and then.
Auctions can be an overwhelming experience. Go to other auctions first so you can familiarise yourself with the process.
To help you avoid bidding more than you can avoid, set a maximum bid in advance and stick to it. Don’t get caught in a bidding war, or bid emotionally. If you don’t feel confident, you could consider asking a trusted friend to bid on your behalf or employing a buyer's advocate.
Unlike a private sale, at auction, you cannot negotiate the conditions of sale. Therefore, you need to be really prepared. Review the contract before the auction (you may wish to ask your solicitor to do this), have your finance in order, and consider whether to have the property inspected prior to the auction to help avoid unwanted stress or expense in the future.
There is no cooling-off period after a sale at auction. Once you have signed and exchanged contracts, you are committed to the sale. You will need to pay a deposit upfront too. So, it’s important to have your finance ready and due diligence completed beforehand.
Quick auction checklist – things to consider
- Do you know your budget?
- Consider applying for pre-approval before the auction.
- Know the value of similar homes on the market.
- Register with the agent before the auction. You’ll need to bring some form of identification such as a driver’s licence.
- There may be a final Open for Inspection right before the auction, it may be worth one last look.
- Have a maximum bid agreed on beforehand.
- Consider whether to get a pest and building inspection done prior to auction.
- With no conditions or cooling-off period, have you completed your due diligence?
- Consider asking your solicitor or conveyancer to check the contract before the auction.
- Be aware contracts will be signed immediately after the auction.
- When you sign the Contract of Sale after the auction you will need to pay a deposit so make sure it’s ready to go.
Once you have signed the Contract of Sale, the settlement period begins. On settlement day, you take legal possession of the property. Learn all about settlement and what you need to do to ensure this final stage of buying your new home runs smoothly.