What is the Difference Between Buying at Auction and Buying at Private Sale?

Thursday 08 Aug 2019

When you buy at Auction
•    A property is advertised for a set period and a date set by which buyers must have completed their enquiries (legal, building/pest inspections), arranged their finance & be ready to bid
•    On the day of the auction, buyers compete, bidding in an upward direction until no higher bid is offered
•    If the seller’s ‘Reserve Price’ is reached, the property will be declared 'on the market' by the auctioneer
•    The ‘Reserve Price’ is the lowest price the seller is willing to accept
•    If the ‘Reserve Price’ has been reached or exceeded, the property will immediately be sold to the highest bidder
•    If the ‘Reserve Price’ has not been reached, negotiations will commence with the highest bidder
•    If the property has been sold, the highest bidder must exchange contracts and pay the deposit, which is 10% of the purchase price, immediately. There is no ‘Cooling Off Period’.
•    If you plan to bid at auction, it’s a good idea to have a ‘Deposit Bond’, which will act as a substitute for cash if you don’t have 10% deposit in cash or a cheque book

When you buy via a Private Treaty
‘For Sale’ is the standard term for a Private Treaty sale. It usually has a fixed asking price although there can be slight variations:
•    Sometimes, the seller will seek ‘offers above’ an indicated price
•    Interested parties make offers and negotiate with the seller through the agent
•    The agent may be negotiating with several parties at once and acts under the instruction of the seller
•    When you commence a negotiation, it’s important to be serious and respond quickly, fairly and decisively
•    Be mindful that if you are reluctant to negotiate a fair offer, the owner may accept an offer from another party and sell to another party. The agent does not have to tell you what the other party’s offer is
•    You will be required to pay a refundable holding deposit once your offer has been accepted
•    However, you must sign the contract to buy the property as quickly as possible. Until you do, even if a deposit has been paid, the seller retains the right to sell his/her home to anybody else they choose. If a higher offer comes along, they are free to accept (Your deposit must be refunded, but the owner and agent are not obliged to refund any other costs)
•    Private Treaty sales are subject to a ‘Cooling Off Period’. The ‘Contract of Sale’ will explain how long this is – typically three business days