Should you buy at auction or private sale?
Buying a home is a big step. Deciding whether to buy at an auction or a private sale is just as big a decision. How do you decide?
We’ve put together some tips on each strategy so you can be prepared:
Buying at auction:
Buying at auction is unconditional and there is no cooling off period. Therefore any inspections, building checks and finance pre-approval must be completed prior to auction. You may be able to negotiate special terms that will come into play if you are the successful bidder (e.g. a longer settlement) but these need to be agreed upon by all parties prior to auction.
Read the Contract of Sale and Vendor’s statement (Section 32) prior to auction. It’s prudent to have a conveyancer or solicitor review these documents too. Follow up any concerns or queries prior to auction.
Be prepared – know your maximum budget, stick to it and have a bidding strategy in place. It can be helpful to watch a few auctions you aren’t bidding on so you feel more comfortable with the process.
In Victoria, the auctioneer can place a ‘vendor bid’ during the auction. This is a bid on behalf of the seller to show that they are not yet satisfied with the price reached.
If the bidding reaches the price the seller is happy to sell at (the ‘reserve’), the auctioneer will declare that the property is ‘on the market’ and will be sold to the highest bidder. If the reserve price is not reached at auction, the highest bidder will normally have the first chance to negotiate the price with the seller in private to see if an agreement on price can be reached.
Have your deposit ready. If you’re successful at auction, you’ll be required to present a deposit (usually 10% of the purchase price) on the day.
Buying at private sale:
A private treaty sale is when a property is purchased through direct negotiations with an estate agent and the owner. A sale price must be agreed upon by both parties.
Unlike purchasing at auction, you can make the sale subject to conditions such as obtaining finance.
Organise any pest or building inspections before finalising the sale. These can form part of a condition of the Contract of Sale, if agreed upon by both the seller and buyer.
Before presenting an offer, research comparative sales in the area. This will help you determine the expected market price and assist with any negotiations. You and your conveyancer or solicitor should also read the Contract of Sale and Vendor’s Statement (Section 32) and follow up any concerns or queries you may have.
A three business day cooling-off period applies from the date you sign the contract, unless the sale is within three days of a public auction. Find out more about cooling off periods and their drawbacks.