Selling by negotiation
Selling by negotiation, with or without an advertised price, is relatively straightforward. Buyers can make conditional or unconditional offers, with the owner expected to either accept, or make a further counter-offer.
All offers have to be in writing on an approved sale and purchase agreement.
Once price and conditions have been agreed, the contract is usually sent straight to the lawyers.
A deposit is either due on acceptance of the offer, or when the agreement becomes unconditional. The deposit sits in a trust account for a number of days before being released.
The balance of the purchase price is payable on settlement date.
A deadline sale or deadline private treaty is very like a tender process. A property is offered for sale with no advertised price. Prospective purchasers are required to submit their offers by a deadline date. Unlike the tender process, vendors usually reserve the right to accept an offer and sell prior to the deadline.
When the deadline comes around all offers are considered together by the vendor. The vendor is not committed to selling but the expectation, is that the best offer will either be accepted or that negotiations will take place between the person making the best offer.
Deadline sales are less restrictive. In the deadline sale prospective purchasers are able to include whatever terms they wish on their offer, and use a standard ADLS Agreement for Sale and Purchase form.
With deadline sale, you put your best foot forward. You are not going to get the opportunity to go in low and hope to negotiate the vendor down. If you go in below your best price you could well be eliminated from the process at an early stage. The time deadline adds an element of urgency and encourages purchasers to minimise the conditions they require to improve the attractiveness of their offer. It can also encourage pre-deadline offers at the upper end of vendor’s expectations as the prospective purchaser tries to beat the market.
Selling by auction
A property auction is a fast-paced, public sale. The property is sold to the buyer with the highest bid after the seller’s reserve price is reached.
If you are selling a property by auction, you will need a sole agency agreement with an agent, and you must set a reserve price before the auction. The reserve price is the lowest price you are willing to accept for the property. The reserve price is confidential.
Buyers will receive an auction pack if they register their interest with your agent, and this will include a copy of the sale and purchase agreement and information about the property.
Understanding the pre-auction offer process
A pre-auction offer is an offer that is made for the property before the day of the auction. The offer will be written on the auction sale and purchase agreement and will be unconditional. If you are willing to accept the offer, the auction may be brought forward from the advertised date, or it may be cancelled if a sale and purchase agreement is signed.
If the auction is held earlier than advertised, the pre-auction offer becomes the first bid at auction. The property can sell any time after that first bid.
Auction sales and purchases are unconditional
A buyer cannot attach conditions to an auction purchase, but they can approach you to change the settlement date. Once the bid is accepted and the auctioneer’s hammer has fallen, the sale will be unconditional and must go ahead.
Auctioneers sometimes use vendor bidding to start the auction or to move bidding towards the reserve price. A vendor bid can be made by the auctioneer or a person working on behalf of the seller, such as the real estate agent.
Vendor bids are only allowed when:
- the property has a reserve price
- the reserve price hasn’t been reached
- the bid is clearly identified by the auctioneer as a vendor bid.
Selling by tender
When a property is being sold by tender, buyers make confidential written offers to the agent before a deadline. Buyers’ offers may be conditional, and you can also attach conditions to the sale, for example, stating the settlement date or listing the details of the chattels that come with the house.
Buyers can make an offer at any time before the tender deadline. The agent will present offers on a tender document, which is a type of sale and purchase agreement.
Once the tender deadline arrives, the owner will decide which offer, if any, they will accept. If they accept an offer, they will sign the tender document.
The owner can negotiate with the buyer to change the price and/or conditions in the tender. If this happens, the agent will ask both parties to initial any changes to show they both agree with them. Any changes should be read first, and make sure you understand and agree before initialling. Your lawyer or conveyancer can advise you during this process and should check the final agreement before you sign it.
Multiple Offer Procedure
This process is designed to give all potential buyers an equal opportunity. It is not like an auction where an agreement is automatically formed with the successful bidder. The seller is not obliged or required to accept any offer. They may accept one offer, reject all offers, or choose to negotiate further with one party.
Once we know there is going to be more than one offer for a property, all prospective purchasers are invited to make their best offer for the property, like in a tender situation. We will usually set a time period for all offers to be presented.
A multi-offer acknowledgement form will also need to be signed.
The manager, or a neutral salesperson from our office will present all offers to the vendors in sealed envelopes for them to either accept one, or choose to negotiate further with one. If only one salesperson is bringing all offers, they can be the neutral salesperson.
There may be no further opportunity to improve your offer after this time.
If this is carried out electronically, all offers will be sent to the owners at the same time.
In some cases, all offers can be sent directly to the vendors lawyer to present to their client.
Until such time as the vendor has accepted an offer and signed the agreement, other parties are able to make offers, and be in the multiple offer.
It is important that all parties are clear as to exactly how the multiple offer will be carried out, and that no party will be at a disadvantage to the other. No party will have knowledge of any other parties offer at any time.