Sale by private treaty is the most common way of selling property in Australia. So as we have moved full steam ahead into the spring season, I thought I’d settle some misconceptions about private treaty purchasing.

Some buyers have a very strong preference for private treaty because they see it as the ‘fairer’ and ‘less stressful’ way to buy real estate. At the end of the day, all sales methods have their pros and cons for buyers. Don’t miss out on a great property for fear of buying it via auction. Let me give you some clarity on private treaty purchasing.

Private treaty listings are offered for sale with a set asking price. The asking price is not necessarily the minimum price the vendor will accept – but it is a price they have indicated they will accept. The actual selling price is determined after a period of negotiation. Offers pass back and forth until the vendor and buyer have a meeting of the minds on price and terms.

Buying via private treaty is less dramatic than buying via auction but it is not without its pitfalls. Here are the positives and negatives that apply to private treaty purchasing.

The risks for private treaty buyers
  • You can still pay a premium if you don’t do your comparable sales research properly. Never assume the asking price accurately reflects today’s market value.
  • If you and another buyer have your hearts set on a property, a bidding war can break out with offers escalating rapidly until one of you relents. This situation can be every bit as nerve-racking as an auction. Negotiations usually happen over the phone and the agent is not required to tell you the exact competing offer. (With auctions, you know what your competitors are offering at all times.)
  • Unlike auctions, where the price at the fall of the hammer is the final sale price, acceptance of your offer in the case of private treaty sales does not mean the deal is done. Contracts must be exchanged for a sale to be 100 per cent and in most cases there is a delay between offer acceptance and contract exchange – this is when you do your pest, building and strata checks
  • In some states, such as NSW, gazumping is allowed. Gazumping is when your offer has been accepted by the vendor, but before you’ve exchanged contracts, they sell the property to someone else without giving you the opportunity to increase your offer. The time between offer acceptance and contract exchange is the danger period. There’s nothing to stop other offers being made and the agent is obligated by law to refer any further offers to the vendor. Minimise this risk by having your finance pre-approved, your building and pest inspector on stand-by and get your solicitor or conveyancer to look at the contract before you make an offer.
The benefits for private treaty buyers
  • It feels less emotional than an auction and doesn’t require snap decisions.
  • You don’t have uncertainty around price. You know you can buy the property for the asking price – probably less!
  • You have more room to negotiate terms and conditions favourable to you. Most states allow a cooling-off period for private treaty sales so you can back out if you change your mind or find out about any problems. There is no cooling-off period with auction sales.
  • It’s common practice to get your pest and building inspections done once your offer has been accepted, so you don’t have to pay for any reports until you’ve made an agreement to buy the property. Once again, keep this timeframe short though to prevent gazumping.
Tips on negotiation

Found a property you want to buy via private treaty? For more info, refer to my advice on the art of negotiating.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.