Buying A House By Private Treaty
By far the most popular way to buy and sell property is through private treaty. A price is set by the seller and the property listed either through a real estate agent or privately, for sale by owner. In general, the price is negotiable with the seller often asking a higher amount than they expect to sell the property for, and the buyer making an initial offer much lower than the asking price.
Example Of Buying A House By Private Treaty
Newly married couple Thomas and Claire Tyson have decided to invest in their first property. They have a general idea of the type of house they want and the area in which they wish to live, however their first step is to ensure their current finances will support their decisions.
Their first step is to visit their chosen financial institution and obtain a pre-approval for a home loan. This process lets them know how much they will be able to borrow when the time comes, although at this stage the loan is not guaranteed.
Home Buying Negotiations Explained
Thomas and Claire have finally decided on their dream home. After inspecting it a number of times they request a copy of the Contract for Sale from the agent. The Contract details all relevant information, such as zoning, council restrictions and included or excluded fixtures and fittings. There should also be attached a copy of the title documents and any necessary certificates.
The Tysons are now ready to make an offer to the owners of the house. Their offer is lower than the asking price and this is where the negotiations start. In addition to the price, these negotiations also involve details of the potential sale such as:
- the settlement date, when the purchase price needs to be paid in full. This is when the title of the property will be officially transferred to Claire and Thomas and they will be able to move in. This is generally set at six weeks from the date of the signing of the Contract;
- any inclusions like curtains, barbecues or light fittings;
- the deposit amount.
The owner finally agrees on a purchase price and Claire and Thomas are required to pay a deposit to secure the property. They are happy to pay 10% of the asking price, however the deposit is often less than 10%.
Paying a deposit does not secure the property for the couple as the agent is entitled to take as many deposits as they like.
Keeping their fingers crossed, The Tysons hope they will not be gazumped.
This occurs when a deposit has been paid but the seller ends up selling the property to another buyer. Until contracts are exchanged the owner has no obligation to sell to any particular buyer and will generally sell to the person offering the best purchase price. Your deposit will be returned, however you will not be compensated for any other money spent such as a building and pest inspection and legal advice.
Exchanging Contracts Explained
Once the contract has been signed, both the seller and the Tysons are committed to the sale. Thomas and Claire are entitled to a cooling-off period which begins the day the contracts are exchanged and ends five days later. If they needed to, they could withdraw from the sale during these five days, however they would be required to pay non-refundable compensation to the seller of 0.25% of the purchase price.
Before signing, Thomas and Claire make another visit to their bank and confirm the original loan approval amount, receiving the confirmation in writing.
Everything is ready for settlement.
Thomas and Claire finally take possession of their new home six weeks after the contracts were signed. Their solicitor who has done the conveyancing has verified that the legal title of the property is in order and will affect the transfer on their behalf. He has also arranged payment of any rates and adjustments for transfer of water into the Tyson's name. They have instructed their bank to pay the balance of the purchase price and are now the proud owners of their first home.