Are you starting to endure the scary and exciting process of buying your first home? You may know absolutely nothing about the process or you may feel like a seasoned professional from a bit of research – here I aim to get you thinking about certain elements to the process, each week I will hopefully add some value to you by sharing information, personal experiences and much more.
Before I get too far into this weeks blog may I just add; this is by no means financial advice and I don’t profess to know absolutely everything, I do however have the experience of going through this process multiple times in the last five years and trying to comprehend what each different method of sale meant. Now as a Real Estate Agent I work with these methods which can all have pro’s and con’s to the vendor, and also to you as the buyer.
- – Price By Negotiation; this form of sale is a method you are likely to have seen a lot and will continue to see frequently. A property is listed as ‘price by negotiation’ for many different reasons, these include; The agent has not found many comparable properties that have sold near the property to be able to accurately fix an asking price, The agent is relying on buyer feedback in regards to price (what they would be willing to pay), the property may also have special features (views, aesthetics, amazing garden etc) that can’t be justified by just photos, therefore they are garnering interest by drawing more potential buyers to the property to see the special feature(s). Price by negotiation can be difficult and frustrating as a buyer however I encourage you to try and find out as much information as you can if you wish to pursue an offer.
- Asking Price/Offers Over; When a property is priced it gives a clear indication of where the vendor’s expectations sit and gives you as the buyer a guideline when making an offer. The key bit of information here is, (something which took me a while to comprehend) unlike a car, or any other goods you see listed online the asking price is not an instant ‘click to purchase’ price. It only acts as the guideline and is only in place to provide that guideline to you. Once you make your offer the negotiation has started and the vendor can choose if they would like to counter-offer, accept or decline completely. As I mentioned there is always pro’s and con’s of any sale method and one con can be enquiries aren’t made by a buyer due to on face value the asking price being too high, they keep scrolling and never look at that listing again. As I raised in price by negotiation spiel, quite often the buyer needs to view the property to embrace its true value and really fall in love.
- – Auction; As recent as last year it felt like every property went to auction, and well there is good reason for that. Auctions are designed to gather up all the buyers, put them in a room and let them slog it out until there is a victor. Since the tightening up of lending through the CCCFA (See my last blog) auctions aren’t generally as effective form of sale method. I do say this for most properties, not all however. The predominant sticking point with auctions is that every buyer must be unconditional (cash) at the time of the auction. Not only does this mean they have to pay for their due diligence beforehand and are not even assured a shot at a bid but for most people heading to auction ‘cashed up’ is nigh on impossible. An auction starts with an auctioneer introducing the property and will then proceed to a call for a starting bid – some buyers will choose to go hard and fast early to blow the competition away and some will literally sit on their hands and only bid once the auctioneer starts the count to sell. The vendor will have set a ‘reserve price’ which basically means the absolute minimum it can sell for at auction. Only the listing agent, auctioneer and vendor will know this figure. When the reserve has been hit the auctioneer will clearly let you know by saying something along the lines of “this property is selling” or “this property is now on the market” etc. If the auctioneer thinks the bidding has stalled he can make what’s called a vendor bid, he will state “the bid is with me” this is to tell you that the bid has not yet reached the reserve price so it can’t be sold at the current bid. A vendor bid can no longer be used once the price has eclipsed the reserve price and the top bidder will head through to sign the Sales and Purchase Agreement.
- Tender/deadline sale; Last of all we have sale by tender or a deadline sale, which mean slightly different things however can be lumped into one method. When it comes to residential sales this sale method is reasonably rare nowadays because it takes more time and has the same con’s of an auction without the same pro’s, however it does have it’s own list of pro’s and reasons that you would sell this way. A tender sale is when a date is set for offers on the property to be received by. Generally after the close date the vendor has five days to decide on which offer they would like to accept (if any). Opposed to auction the buyers offers may be conditional on certain things ie. builders inspection, lim report etc. As I alluded to before, the process can take a reasonable amount of time and it’s not as straight forward as a standard ‘price by negotiation’ or priced property.
- Without going to into too much depth I hope that this gives you an overview into different sales methods and how/why they are used. The best thing you can do to best prepare yourself is research the difference between these on your own terms. Experience when buying will guide you and when you are selling trust your agent to make the right call for your property.