Buying a home, through Private Sale
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Buying your first home in a private sale is, literally, a big deal. But whether you are purchasing a ramshackle studio apartment to restore or a sprawling rural estate that is ready to inhabit is irrelevant.
What is important is that you first need to find a Home Loan that’s right for you.
It is only when you have your finances in order that the Real Estate Institute of NSW says that you will then be in a position to “express your interest in a property and make an offer if you think the price is too high”.
Once the agent has discussed your offer with the vendor, you may then be called upon to pay an initial deposit. The REINSW states this does not secure the property for you but it does show the vendor that you are serious.
There are two types of private sale: either through an agent or directly from the seller. In both cases, you make an offer, but until contracts are exchanged, the owner can sell to someone else.
This is called ‘gazumping’ which is disappointing for buyers – who have probably paid for a building inspection and legal fees – but it is not illegal.
One of the greatest advantages of buying a property in a private sale rather than at auction is that – as well as being aware of the asking price – you know that there is a “cooling-off” period (which varies from state to state).
Of course, a higher price may occur if a number of people are interested in the property and all make offers. The REINSW states that prospective buyers opting for a private sale may also be able to negotiate some of the terms of the contract.
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The Power of Property authors Karina Barrymore and Bruce Brammal add that regardless of the asking price you need to start your own evaluation of the property from scratch. They recommend that only after you have decided on its value can you decide what price to offer.
Barrymore and Brammal state: “In most situations your price will be below the asking price. But the worst that can happen is that you receive a ‘no thanks, too low’ response. If you know your market you will then know if it’s you or the vendor who is being unrealistic and you can make your next move based on that.”
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Agents of Change
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If you are having trouble finding the property that is right for you then consider enlisting the help of a buyers' agent who will put in much of the legwork for you.
After helping you locate your ideal property, a buyers’ agent will then negotiate on your behalf to get the lowest possible price.
According to PropertyBuyer managing director Rich Harvey clients generally save more than an agent charges in fees. “We charge a fixed fee which works out at about 2 per cent to undertake a full search appraisal and negotiation and 1 per cent to appraise and negotiate only,” Harvey says.
Private For Sale signs are also worth investigating as the vendor may subtract the cost of the agent’s fees from the total purchase price.
Sites such as BuymyPlace have also spiced up the marketplace by featuring properties that are not listed on other sites.
BuyMyPlace offers the same tools as the real estate agents, plus a few added extras to help you make a decision that suits your specific circumstances. These tools include property sales history and suburb reports as well as online access to its affiliated partners.
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Contracts
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The Power of Property says all properties offered for sale must have a proposed contract for sale, which sets out the terms and conditions.
Under the chapter entitled ‘Doing The Legals’, the authors say that in most cases the contract will be signed soon after you verbally agree on a price with the vendor (usually through the agent).
“It contains a number of important elements including the agreed price, the deposit to be paid, the date at which ownership will change [known as settlement], the property’s fixtures and fittings and what is included.
“The contract will include any special conditions for the sale, deposit requirements and settlement period. Ensure the settlement period suits your needs prior to committing to the contract.”
The REINSW says the contract must also include a copy of the title documents, a drainage diagram and the planning and zoning certificate issued by the local council which, among other things, will indicate whether the property is affected by flooding.
When selling price and conditions are agreed you each sign a copy of the contract and they are then swapped or “exchanged” and the deposit is handed over. Only when both the seller and the buyer have signed the contract and exchanged copies do you both become bound by the contract.
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Cooling-off period
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Most states have a cooling-off period when houses are bought privately. You should arrange for your legal adviser to receive a copy of the contract as soon as possible as you will need to obtain legal advice regarding the benefits and obligations in
waiving the cooling-off period.
The REINSW says the cooling-off period (usually five business days) follows the exchange of contracts and allows time for searches, obtaining reports, and confirming finance. The building inspection is very important as it might help you avoid buying a money pit that needs major repairs. If you do not continue with the sale after the cooling-off period has expired, you will lose 0.25% of the purchase price from the deposit, which is given to the seller.
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Settlement
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Settlement occurs usually four to six weeks after the exchange of contracts. At settlement the buyer pays the balance of the selling price.
Adjustments are made for water and council rates, strata levies for units and any outstanding mortgages are paid out by the seller from the purchase price. The buyer becomes the legal owner of the property after settlement. The REINSW advises buyers to arrange with the agent to inspect the property just prior to settlement.
For further information about procedures when buying a home in a private sale, visit the Office of Fair Trading in your state.
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