If you have been looking to buy a property you may have noticed that there are many methods by which you can do so. But what do all these methods mean for you as a buyer?
Understanding the difference between each method is important
As a Buyer there are many terms used by Real estate agents to describe how to purchase a house. It’s important to understand the differences between all these methods of sale.
This is a public sale where the property is sold to the highest bidder. The property will usually be on the market for about 4-6 weeks prior to the auction. The vendor will set a reserve price which is the minimum price they will sell for. If the property does not reach the reserve price the property is passed in to the highest bidder who has exclusive rights to negotiate with the vendor.
Auctions are commonly held in public, however they can also be held privately in-house or boardroom style.
Buyer tips: Auctions are a great way to know who your competition is, but be careful of getting carried away by emotion and overpaying. There is no cooling off period and this can be daunting for some.
The property is advertised with a price range or contact the agent and interested buyers can negotiate with the real estate agent and make an offer. The buyer can place conditions on the contract, such as subject to finance or building inspections. Buying a property off-market is also a private sale.
Buyer tips: There is more room to negotiate sale terms to suit your circumstances and there is a 3 day cooling off period. Be careful to avoid paying higher than market price.
Knowledge and experience will help you to negotiate the successful purchase of a property for the best price regardless of what method of sale is being used by the agent.
Sale by set date
The property is on the market for 4-5 weeks and advertised with a set date it must be sold by. Buyers can put in offers at any stage with conditions which the vendors can choose to accept. If there is an acceptable offer the agent will go back to the other buyers to ask for their final offer. It is essentially a combination of a private sale and auction.
Buyer tips: There isn’t the urgency of an auction but at the same time you won’t see who your competition is.
Expression of interest / Tender
Buyers are invited to make their offer by a set date over a marketing campaign. The offer made is the buyers final offer which includes terms and conditions. The vendor can choose to accept an offer before the set date however if no offer is accepted the property goes back onto the market as a private sale.
Buyer tips: A great way to be able to put in all your terms and conditions, including settlement date.
Sale by negotiation
The property is advertised without a price and the buyer will negotiate with the agent directly to purchase the property.
Buyer tips: Do your research and make sure you know comparable sales in the area. The agent will not tell you if you are overpaying.
There are many ways to buy a property but it essentially comes down to knowledge and experience if you want to buy the right property and avoid overpaying. Don’t be afraid to call in the experts if you need help as buying a property as it is one of the biggest financial decisions you will make.
The Property Garden are Buyers advocates and Feng Shui consultants and have over 19 years’ experience in the Melbourne real estate market. Contact us today.