As the property market in NSW enters its’ next phase, I expect we will see auction clearance rates ease off historical highs and sales by private treaty will become more common. By definition, private treaty is the agreement for the sale of a property at a price negotiated directly between the vendor and purchaser (or their agents). It’s important to make the distinction that if a property is sold before or after auction it is technically sold by private treaty. Many people don’t know that agents and newspapers report such sales publicly as being sold by auction in order to artificially inflate the ‘clearance rate.’
In a typical private treaty scenario, one or more buyers will make offers on a property and the agent will convey them to the owner. The owner will then respond and the negotiations continue until an agreement on price and terms is reached. However, once this agreement is reached the property is not sold, in fact it’s at this point where things can go wrong for both parties.
Under NSW legislation a property is not sold until contracts are exchanged. An exchange is when a deposit is tendered and two identical contracts are signed by the buyer and seller, dated and swapped. Take note, until this point of exchange the buyer and the seller can both withdraw from the agreement.
For buyers, the best strategy is speed and communication. Given how competitive the property market is you should be ready to buy when you are out looking. Making an acceptable offer and then ringing a mortgage broker to discuss finance will cause delays that may cost you the property. Good buyers agents know this, they prime their clients to be ready, and when they see the right one they pounce. To be clear, if someone else makes a better offer and you haven’t exchanged contracts then the agent must tell the owner and they are free to accept it.
For sellers the best strategy is to have all necessary information available to buyers to expedite the process; this includes building reports, surveys etc. Plus, no matter how unpopular it may make you, the property has to remain on the market and open for viewing until exchange of contracts. I was raised in a household where a handshake was an unbreakable oath. However, having seen many property sales derail over the most trivial issues, I would recommend that the oath be defined by a cheque and a contract.
Be prepared, act swiftly, and only count your chickens once they exchange.