A sale by private treaty occurs when a property is offered for sale at a negotiated price. Often the vendor will set a bottom line price. Ultimately, it is up to the buyer to decide how much they are prepared to pay. The price can be negotiated until a mutually acceptable amount is reached.
Potential buyers will be unaware of how many other offers have been made or the amount offered.
Buying through a private treaty
Making an offer
It will be up to the individual buyer to decide how much they are willing to offer for the property. You will need to decide whether to make a low offer, or offer your best price up front.
It is possible that another offer of a higher amount will be accepted without giving you the opportunity to negotiate with the vendor or their agent. Some vendors may not be willing to negotiate on the price at all.
All offers and counter offers must be made in writing and signed by you. The agent is legally obliged to pass all offers on to the vendor as soon as possible, usually within 48 hours.
When making an offer you may be asked to pay a holding deposit of up $100. This is kept in trust by the agent and will be returned to you if your offer is not accepted.
Offers are not legally binding. The vendor and buyer must both sign a contract of sale document before the offer becomes legally binding. . You may make an offer in the form of a contract of sale. If you do, it is a good idea to add a clause stating that the offer will become invalid if the vendor doesn't sign the contract of sale by a certain date. The contract of sale will become legally binding once it is signed by the vendor.
It is recommended that you get a copy of the buyer's information notice before you make an offer. These are usually made available to prospective buyers during open inspections.
Contract of sale and cooling off
Some buyers may make a contract of sale subject to certain conditions - eg getting satisfactory approval of finance, receiving a satisfactory building inspection report. If you do want the contract to be subject to conditions it is a good idea to speak to a solicitor or conveyancer about the wording. If these conditions are not met - eg finance has been declined, then the contract of sale is cancelled.
The buyer is entitled to a cooling off period of two business days. This starts when the vendor's statement was received or from the date the contract of sale was signed, whichever is later.
This will give you an opportunity to withdraw from the sale without legal repercussions, although the holding deposit paid when making an offer may be kept by the vendor.
To withdraw from the contract of sale you must complete and sign a cooling-off notice and deliver this to the vendor or vendor's agent by either:
- registered post
- in person.
If the cooling off period has expired and you want to withdraw from the sale it is strongly recommended you seek independent, professional legal advice before you do. There can be legal repercussions for breaking a legally binding contract.
Once the cooling off period has expired the deposit is to be paid to the vendor, if they are selling the property themselves, or their agent or conveyancer. This money is held in trust until the settlement date.
Selling by private treaty
You will need to decide on the lowest dollar amount you would sell the property for. If you are using an agent, this will be written into the sales agency agreement. The agent is obliged not to reveal this amount to any potential buyers.
It may be in your interest to accept a slightly lower offer if the contract of sale isn't made subject to any conditions.
Although you are under no legal obligation to accept an offer, if you are using an agent there may be repercussions under the sales agency agreement if you don't accept an offer equal to or more than your bottom line price.
As a vendor you are not entitled to any cooling off period. If you want to withdraw from the contract of sale you should seek independent, professional legal advice before you do. There can be legal repercussions for breaking a legally binding contract.