When it comes to buying a first home, you’re likely to face one of two options – buying at auction or buying through private treaty. Both work quite differently.
Buying a home through private treaty
When homes are sold via private treaty, the vendor (seller) sets the price that they want for the place. This price is normally set out in the property’s marketing material, so you have a good idea if the property is within your budget.
A private treaty sale also gives you the opportunity to negotiate on price by making an offer that’s below the listed
Pluses of private treaty
One of the advantages of buying through private treaty is that as a buyer, you may be able to make a “conditional offer”. This may mean that you agree to buy the property subject to certain conditions such as having finance approved or the home receiving a satisfactory pest and building report.
In addition, a private treaty sale may also give you the benefit of a cooling-off period. This can let you back out of the purchase even after you have signed the
The downsides of private treaty
One of the drawbacks of a private treaty sale is the risk of being gazumped. This is where the vendor accepts a better offer from another buyer, and it is perfectly legal because until you have signed and exchanged contracts with the vendor – and paid a deposit – the sale of the property is not a done deal.
One way to protect yourself from being gazumped is to speak with your Aussie Broker about having your home loan pre-approved so that there’s less delay in getting approval and then signing the contract of sale.
Buying at auction
Buying your first home at auction can be a very different experience from a private treaty purchase. At an auction interested buyers gather together, all competing to make the highest bid. While the negotiations for a private treaty sale may take days, even weeks, to be sorted, an auction can be done and dusted in a matter of minutes. That makes buying at auction very exciting – but also a lot more stressful.
An important aspect of auctions is that once the hammer falls the highest bidder doesn’t have the benefit of a cooling off period. As a
More to the point, you need to be confident you will be able to secure a home loan to actually pay for the property. This is why having your home loan pre-approved makes even more sense if you’re buying at auction.
Preparing for an auction
Take a look at our five tips for buying at auction to prepare for the big day.
1. Be sure the property is right for your first home
If you are the highest bidder when the hammer falls, you will be asked to sign the contract of sale right then and there. So be very sure the home is right for you.
2. Research the market
Research the local market and look at the prices that similar homes are commanding. This can give you an idea of how much the property you are interested in may sell for. It’s no guarantee, but it can help you avoid lining up for a home that’s beyond your budget.
3. Know what sort of deposit you need
If you’re the winning bidder you will need to pay a deposit on auction day – usually 10% of the sale price. Check with the selling agent exactly how much deposit you need and whether this should be paid with a bank cheque or personal cheque.
4. Set a bidding limit
Speak with your Aussie Broker to know how much you may borrow – this will help you establish your maximum purchase price, and therefore your bidding limit.
5. Have the sale contract reviewed before auction day
As the sale is final if you are the highest bidder, it is critical to have the contract of sale reviewed by your solicitor or conveyancer before auction day. This way you can be alerted to anything unusual or any conditions that may not be in your favour – it’s even a chance to negotiate the fine print like the settlement period or how much deposit you
No matter whether you plan to purchase through private treaty or at auction, knowing what to expect can take the mystery out of buying your first home.
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- Chapter One : Getting started
- Chapter Two : Your dream home
- Chapter Three : Money matters
- Chapter Four : Ways to purchase
- Chapter Five : Understanding interest rates
- Chapter Six : Understanding home loans
- Chapter Seven : Lending sources
- Chapter Eight : Getting your loan
- Chapter Nine : Choosing a home
- Chapter Ten : Steps to settlement