Most properties in Australia are bought and sold using the private sale method. Read on to find out everything you need to know about buying a private sale property, including:
- The private sale process.
- Steps for buying private sale property.
The private property sale process
Sellers usually hire a real estate agent to act on their behalf when selling a property by private sale, though a small percentage choose to sell to buyers directly. We’ll focus on buying property via an agent.
When using an agent, the steps in the selling process are:
- A seller and a real estate agent agree on a selling price to list a property for sale.
- The agent markets the property to potential buyers (e.g., listing the property online and conducting open home inspections).
- The agent presents any potential buyer offers to the seller for consideration, negotiating further with the buyer if necessary to complete the sale.
Steps for buying private sale property
It’s important to understand that a real estate agent is hired by a seller to sell their home for the highest possible price. Real estate agents therefore work for sellers, not buyers. Follow these steps to help you avoid paying too much for a property.
Step 1: Get your finance pre-approved
This will let you know what you can afford. It will also give you more negotiating power with sellers. Getting your finance pre-approved will involve a lender assessing your borrowing power. This is determined by how much deposit you can provide and the regular repayments you can afford to make.
If you’re a first home buyer, you might be eligible for help with your deposit. For example, the:
It’s important to consider all your upfront buying costs when getting your finance-approved. This includes:
- property purchase price
- stamp/transfer duty (this is a government charge on the transfer of ownership of assets, and the amount varies among Australian States and Territories)
- legal fees
- loan application fees.
Step 2: Research the real estate local market
This is crucial. You need to understand current market prices for different types of properties in the area where you want to buy. It’s easy to research property prices online.
Look for the prices that properties have recently sold for, not just the prices that current properties for sale are listed at. Many sellers will list at a higher price than they will take, hoping to get more than they expect.
Once you’re armed with this property price information, you’ll be able to identify the best buying opportunities. Shortlist the properties you’d like to inspect. The more properties you can identify, the better your chances of negotiating a good deal.
Step 3: Contact the listing real estate agents to arrange inspections
The listing agent for each of your shortlisted properties agent will arrange a time to meet you onsite. Although you can view photos (and sometimes videos) of a property online, you should always thoroughly inspect it in person before you decide whether to make an offer to buy it.
Step 4: Conduct your inspections and ask questions
Inspect each property with a critical eye, looking for any potential issues. If you’re really interested in a property, don’t act too keen in front of the agent. Be cool, calm and business-like.
Make sure that you also ask the agent plenty of questions about the property, including:
- Why is the seller selling?
- How quickly does the seller want to sell?
This information can help you potentially negotiate a lower selling price if the seller needs to make a quick sale. For example, they may accept a lower offer.
Step 5: Negotiate and make a ‘clean’ offer on your preferred property
Formal offers to buy usually need to be made on a sales contract to present to the seller for consideration. Before you do that, you may be able to negotiate the offer with the agent.
Use all of the information you’ve gathered to determine what you think the property is worth, but always start below that figure when negotiating. You can always move up to your pre-approved finance limit if necessary. If you start at your limit and it’s rejected, you have nowhere to go.
When you want to make a formal offer, it’s a good idea to have a solicitor look over the sales contract to make sure there are no unfavourable terms or conditions for you.
Ideally, you should make a ‘clean’ formal offer. This is one that isn’t subject to any conditions other than a building and pest inspection. It will make your offer more attractive for the seller to consider than one that is ‘subject to finance’ or ‘subject to you selling your current home by a certain date’.
You should also put a time limit on your offer (for example, 24 hours). This puts pressure on the seller to make a decision. If the seller rejects your offer, you can increase your offer if you have room to move. You can also decide to make an offer on another property.
Step 6: Arrange your building and pest inspection if your offer is accepted
If the home doesn’t have any issues, this will give you peace of mind that you’ve made the right decision. If there are issues identified, you can decide whether or not to proceed with the sale. You can also use that information to try and negotiate the price of the sale down further.
Step 7: Liaise with your conveyancer and lender to arrange settlement
Settlement is the date that you pay for the property and ownership transfers to you. You will need to liaise with your solicitor and lender to make sure that the transfer and all the associated paperwork proceed smoothly.
The bottom line
It’s important to be prepared when you make an offer to buy a property by private sale. Being prepared helps you to negotiate the best possible price.