If reality TV is to be believed, just about every house sold in Australia goes to auction – but the truth is, the majority of residential sales use private treaty.
Distinct from the dramatic auctions often portrayed on television, private treaty is the more traditional and popular sale method.
What is a private treaty sale?
This is when a property is listed for sale through a licensed real estate agent, with an asking price attached.
The property is marketed, and then a potential buyer makes an offer to the agent, who presents it to the seller, who decides whether to accept or not.
Typically, negotiations go back and forth until an agreement about price and terms is reached.
Multiple offers are often managed by the agent, with all discussions done in private.
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LJ Hooker Head of Real Estate Christopher Mourd says private treaty “clearly” remains the most popular sale method across Australia, followed by public auctions.
He says good agents, who understand market conditions and local trends, can help vendors decide which method is best for their property.
“In general terms, selling by private treaty is best, where there are many similar properties in an area. If there is lots of similar stock available, meaning the competitive framework isn’t great and it won’t be fiercely competed for, it makes sense to put a price on it and attract appropriate buyers.
“Whereas, if a property is going to be very well competed for, as is the case in many metropolitan markets at the moment, it makes perfect sense to go to auction. With an auction, everything is clear and transparent and vendors can feel comfortable knowing they got the highest and best price on the day.
“The difference between the two methods is pretty simple. One is a public negotiation process, at an auction, where everyone can see everything, and the other is a private negotiation,” Mourd says.
The actual mechanics of the process are the same, he says.
“The property is advertised, people inspect the property and people put in offers.”
It’s important to have a good relationship with the agent when selling via private treaty.
When looking to sell, vendors should interview several potential agents, Mourd says.
Agents should look at demographics, market trends, pricing value and comparable sales in the area, before advising of a proposed sale method and price.
The only real risk with private treaty is over-estimating the sale price in the first instance – but this can be eliminated by a quality agent who gets the market.
“It can be quite dangerous to overshoot the price. It can impact on the number of days on market and ultimately, you may end up getting less. Active buyers in the market very much know market value – and so should a good agent – so the worst thing you can do is overprice,” he says.
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