The different ways you can buy property

23 February 2018

So you’ve found a place you like the look of – now what?

If you’ve never done it before, it’s only natural to be nervous – it’s a big deal! Unless a property is advertised with an asking price, you might be wondering how you actually go about putting in an offer.

Auction, negotiation, tender, deadline treaty … there are a number of ways to buy a home.

As buying your first home is such a big investment, we’ve put together a quick rundown of the main methods to get you up to speed before diving in. Know what you’re getting into so you can keep your cool and avoid getting caught off guard in the heat of the moment. 

Tips for success at auctions

So, you’ve found the perfect property and now you’re in the auction room, heart racing and with sweaty palms, waiting for bidding to start on your dream home.  Chances are, you have good taste and there’ll be other buyers there waiting to bid on the same property. What a cheek! Luckily, there are some things you can do to boost your odds:

  • It’s not all about the budget. Often it’s how you present your offers during the auction that can play a key role in success or failure.  Look confident and make your bids with an air of control. Bold bidding with body language to match may help you win the day.
  • Plan ahead. It’s important to know your limit. It can be tempting during the excitement of an auction to think: “Just one more bid and then I’ll stop.” This is usually a mistake - even if you end up winning the auction and getting the property, you have possibly paid more than you can afford. Before the auction, figure out what your final offer will be, and then stick to it.  
  • Get in an early bid. An early bid can help calm the nerves and lets others know you’re interested. Other potential buyers have no idea what your budget limit is - your confidence may make them think twice before bidding.
  • Quick bids. Keep other bidders on the back foot by firing back quick bids. This will take the pressure off you and heap pressure on the other bidders.

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Negotiation

This method of buying property allows sellers and buyers to negotiate the final price. Properties are usually advertised with a price or price band and potential buyers can make an offer on the property. Offers can be unconditional or conditional:

  • Unconditional offer:
    The simplest form of negotiation. The buyer agrees with all of the terms set out in the contract.
  • Conditional offer:
    The buyer agrees to buy the property, but with one or more conditions that must be met first before the sale can go through. Getting a building inspection is a common example of the type of condition which can accompany a conditional offer.  

Any offer, whether conditional or unconditional, must be made in writing (yep - it’s kind of old fashioned) in the form of an Agreement for Sale and Purchase which is a standard form usually prepared by the seller’s real estate agent or lawyer. If the seller is not happy with the offer, the seller can make a counter offer and negotiations can continue until both parties are happy with the agreed price.

Auction

An auction is a public process where potential buyers bid against each other to purchase a property. By publicly negotiating the price, buyers and sellers can see what the true market value of the property is.

Even seasoned property professionals can find auctions intimidating sometimes, but doing your research beforehand and knowing what to expect can make the whole process a bit less stressful.

While it might all sound a bit daunting, one of the benefits of buying a house at auction is that it can be quick and easy. An auction has a set date of sale and you generally bid on an unconditional basis so a house can be bought and sold at auction in minutes.   

Tender

A tender is a way of buying property through private and confidential offers made by a set deadline. Offers need to be submitted in writing on a standard tender document, and handed in to the specified closing location by the tender deadline.  Don’t worry, the real estate agent will usually provide all the documentation and help you with the process.

All tenders are opened at the same time (like presents at a 5 year old’s birthday party!). Vendors reserve the right to negotiate with any tenderer but if your tender is accepted you are legally bound by the terms and conditions of the tender document. It’s worthwhile getting your tender offer checked with your lawyer before you submit it – you don’t want any hidden surprises.     

Deadline treaty

When a property is sold by deadline treaty or sale, it is marketed for a set period with a clear end date. Like the tender process, properties sold by deadline sales do not need to include an advertised price. Vendors can choose to accept an offer at any time and do not have to wait until the end date to agree on a deal.

Remember, the seller doesn’t have to accept the highest offer and can negotiate with anyone who puts in an offer – the seller might want a quick sale for example, and perhaps you can move in straight away, that might make your offer more attractive to the seller than a higher price offer with a longer settlement date.  

What are the different types of property ownerships to consider?

Freehold

You own the land and buildings on it
 
 

Cross-lease

You own the property and a share of the land it is on. There are usually one or more other properties on the section owned by other people and ownership of common areas may be shared. Cross-leased properties might be slightly more affordable than freehold titles, largely because of the restrictions placed on owners — for example, any building work that changes the footprint of the property may need sign-off from the other property owners before it can be completed.
 
 

Leasehold

You own the property but not the land, so you pay rent for that land to its owner. It’s important to know how long it is until the next rent review and how much will the rent increase. There may be other restrictions on the use of the property which you should consider before you buy.
 
 

Strata or unit title

Common in units, townhouses and apartments. You have ownership of your unit but ownership of common areas is shared.

There are also body corporate fees to consider.
 
 

As with most choices in life, each of these types of property will have their own advantages and disadvantages. What’s right for you will depend on your own particular circumstances. We recommend that you obtain legal advice before making an offer to ensure you understand the nature of the property and any restrictions on its use or additional costs which might be involved.  

Get the right team on your side to help with your search. Find an Adviser here.

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