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Below is Chapter 3 of our ‘Buying Property in NSW’ booklet. To read the other chapters of our booklet, click the links below:
- Chapter 1 – Introduction
- Chapter 2 – Ownership
- Chapter 4 – Due diligence
- Chapter 5 – Negotiations
- Chapter 6 – Exchange
- Chapter 7 – Settlement
This chapter outlines the two main methods of purchasing property in NSW: private treaty and auction.
Private Treaty
In a private treaty sale, the vendor sets a selling price, and the agent negotiates with potential purchasers to achieve the best possible outcome for the property. Some private treaty sales may be conducted on a ‘best offers by’ basis, requiring you to effectively put in a private bid for the property. During this time your lawyer may negotiate changes to the contract on your behalf.
You may choose to pay a holding deposit, typically around 0.25% of the purchase price, to secure the property and prevent the vendor from considering other offers while negotiations are ongoing. This amount is usually incorporated into the full deposit upon exchange of contracts. If you withdraw from the transaction before exchanging contracts, the holding deposit is forfeited.
After exchange, individual purchasers typically get a 5-business day cooling off period during which you can withdraw from the contract without forfeiting your entire deposit. It’s important to secure formal loan approval promptly during this period to avoid risking your deposit.
If a property sale is particularly competitive, the vendor may require the successful purchaser to waive the cooling-off period with a section 66W certificate, making the contract unconditional upon exchange.
Auction
For an auction, potential purchasers can negotiate changes to the contract before the auction. If you are successful on the day, then your pre-negotiated contract terms will apply.
You will need to remember to register to bid on the day of the auction. If you buy at auction, you are not entitled to a cooling-off period.
Some key terms to note at auctions:
- Reserve price: The minimum price at which the auctioneer can sell the property without the vendor’s express approval. When bidding at an auction reaches the reserve price, the property is regarded as ‘on the market’. Once this happens the vendor will accept the highest and final bid.
- Passing in: This occurs when the property fails to reach the reserve price and is not sold to the highest bidder. However, the highest bidder gets the first option to negotiate with the vendor.
- Vendor bid: A bid made by the vendor, usually to initiate bidding or when the auction stalls. In NSW, the auctioneer is permitted to make one vendor bid, which must be announced as such. If the auctioneer makes dummy bids (non-genuine bids to influence sale price), they may be prosecuted and fined.
The information contained in this post is current at the date of editing – 21 August 2024.
