Link to my new video in the Buying a Property series: https://youtu.be/RZCmH2xp50E
In this short video, I guide you through agreeing on a purchase price for both private treaty and auction sales.
TRANSCRIPT
Buying a Property – Purchase Price – What you need to know (5 mins)
This is one of a series of videos I will be presenting on buying a property from the perspective of the purchaser setting out small-ish chunks of the legal process involved, which is also known as “conveyancing”. Today I’m going to talk about how to determine the purchase price before you enter into a contract to purchase property in NSW. Now, in Australia, the laws around property purchases are state-specific so if you are interested in buying a property located in NSW, this video is for you!
The first point to note is that this video series deals with residential property only, such as a house, unit or block of land and not with any type of commercial property.
As always please hit “SUBSCRIBE” if you like this type of content and give a thumbs up if you find the information useful – I’ll be posting a new video every week.
A quick disclaimer that my videos are general and informational in nature only. They are not intended as legal advice, nor should you rely on them as legal advice. Please see the full disclaimer in the description box below.
So, lets dive right in:
How do you determine the purchase price?
Now, you’ve found a property you are interested in – the question is, how do you agree on a purchase price?
There are two different ways you can enter into a contract to purchase a property in NSW: the first is by private treaty; the second is at auction. The way the purchase price is determined will differ depending on which method is used.
If the sale is by “private treaty”, the vendor sets their asking price with their real estate agent (whom I’ll refer to simply as an agent from now on). The price may be advertised or not, or may appear as a “price guide”. It’s the price the vendor wants you to pay for the property but it doesn’t mean you need to agree to the asking price. You may be happy to agree to the vendor’s asking price or you might try to make a lower offer and negotiate the price with the vendor via their agent. In NSW, the agent is legally obliged to pass on all offers they receive for a property to the vendor right up until exchange of contracts occurs (which is what we call the act of actually entering into a contract to purchase the property from the vendor and when the purchase becomes legally binding on both parties). Check out my video on “What is Exchange?” for more details on that topic. The only time the agent does not need to pass on an offer is when the vendor has instructed them not to in writing – such as not to bother them with offers under a certain price…
Bear in mind that even if you and the vendor agree on a purchase price, this does not guarantee that the property will be sold to you. Up until contracts are exchanged, the vendor is free to sell the property to anyone else and if that happens, it’s called gazumping. It usually happens if the vendor receives a higher offer after accepting your offer but before you’ve exchanged contracts but that’s not always the case. Ultimately, the vendor can change their mind about selling the property for whatever reason up until exchange of contracts.
In the case of a property sold by auction the price the vendor wants to receive is not disclosed by the real estate agent. Anyone interested in purchasing the property needs to attend the auction on the nominated date and time, register and bid against other interested parties. There is also the option of using a “buyers agent” to do this on your behalf. Before the auction, the vendor sets a minimum price with the auctioneer, and the property will only be sold by the auctioneer if the bidding reaches that threshold. At the auction, if the hammer falls and you are the highest bidder above the vendor’s reserve price – then congratulations, you’ve just agreed to enter into a binding contract right then and there. A benefit here is that you can’t be gazumped once the hammer falls.
That’s just one of the differences between buying a property by private treaty versus at auction that you should be aware of. The rest are beyond the scope of this video so I have a video that does more of a deep dive into private treaty versus auction sales if you’d like to know more.
So, that’s all I have for you today – remember to please “SUBSCRIBE” and hit the “Like” button if you liked this video, please share it if you know anyone who is thinking of buying their dream home in NSW and doesn’t know where to begin…
If you’d like to make an appointment to engage my services, please follow the link in the description box to contact me AND if you have any topics you’d like me to address in future videos, please leave a comment in the comment section as I’d love to hear from you. I hope you found this video helpful and thank you for watching!