The Property Buying Process by Private Sale, Sale by set date, or at Auction
We know how difficult it can be to have a good understanding of the buying process, due to the inconsistencies in the way different real estate businesses operate. For this reason we outlined the following for your information and understanding of the sale process.
PRIVATE SALE AND SALE BY SET DATE – MAKING AN OFFER (Not at Auction) – A standard good practice
If you wish to make a written offer on a particular property we will require the following information from You (the Buyer):
- Your Full names (of all parties who will appear on the sale contract)
- Your Current Address
- Your Offer Price
- A Deposit amount which is generally is 10%
We will require an immediate initial deposit, being 0.2% of the offer price (This amount forms part of your 10% deposit that you will be required to pay within two  weeks of your offer being accepted). Should the Buyers offer not be accepted this amount will be refunded back to the Buyer in full.
- A Settlement date which generally ranges between 30 and 120 days
- Any Conditions that the Buyer wishes to apply to their offer (eg subject to finance being approved, subject to a building or pest inspection, etc.)
Once the Buyer has provided the above details to us we will formalise the Buyers offer by requiring the Buyer to sign a Contract of Sale and a Section 32 document. Once all documents have been signed we will present the Buyers offer to our Vendors for their consideration. In the event of a Sale by Set Date, all offers received will be presented to the Vendor at the same time after the sale by set closing date has been reached.
Please also note that in a strong property market and in the process under a private Sale by Set Date, it is not uncommon for a single property to receive multiple offers after an open for property inspection. In this situation, in the best interest of all parties, interested Buyers will be given an equal opportunity to put forward in writing their strongest offer for our Vendor’s consideration. Please refer to the following form which can be downloaded in this type of situation. Hit on this link: Buyer’s Acknowledgement of Multiple Offer Form
Acknowledgement of Multiple Offers
More Than One Interested Party
Link and Connect Pty Ltd (‘the real estate agent’) has made buyer aware that there is at least one other buyer interested in making an offer for the Property and to be fair to all parties, the multiple offer process has been enacted. The real estate agent has also made us aware that should the other Buyer not proceed with their offer, buyers will be informed and given an opportunity to amend our offer accordingly.
The real estate agent warrants that no other party will be aware of our offer (including our conditions) until it is presented to the seller (‘the Vendor’). The real estate agent will also not divulge the other Buyer’s offer (or their conditions) to us.
Offers To Be Presented To The Vendor
The real estate agent will present all written offers to the Vendor as soon as is practicable.
More Than One Real Estate Agent Has An Offer:
To ensure fairness to all Buyers, if more than one real estate agent has an offer to the Property, the offers will either be presented to the Vendor by both real estate agents or an entirely separate real estate agent who will receive no extra financial benefit from either transaction.
The Vendor’s Options
The Vendor will have the following options:
a. Accept one offer;
b. Reject all offers;
c. Choose to negotiate with one offer from the Buyer
The real estate agent will contact buyer once the Vendors decision has been made.
Best Offer (Price and Conditions)
The real estate agent has advised us to put forward our “best offer” and we acknowledge that should the Vendor’s decision be to accept another Buyer’s offer, it will be too late for us to increase our offer price or change our conditions. We confirm we have offered both our best price and set conditions (as applicable) which give us (the Buyer) the best possible opportunity to secure the property being offered by the Vendor.
BUYING AT AUCTION
If you are the successful bidder at auction:
- The Buyer will be offered a contract in the same terms that was on display before the auction
- The Buyer cannot make the contract subject to any further conditions (for example, obtaining finance or having a longer settlement period) unless our Vendor has agreed to them in writing
- There is no cooling-off period.
Before a Buyer makes a bid the following is recommended:
- Research the market, search the internet, attend auctions, speak with several estate agents and monitor auction results
- Get independent, expert help on legal, finance and building matters.
What is an Auction?
An auction is a public sale, usually conducted by an estate agent acting as an auctioneer, and governed by strict rules. The auction is advertised for a specific place, time and date. Prospective buyers bid and the property is offered to the highest bidder.
There is an advertising campaign with open house inspections for several weeks leading up to the auction date. In the lead-up, the agent may contact you to gauge your level of interest.
On the day of the auction, the property may be open for inspection, generally half an hour before the bidding starts. This gives you a chance to have a final look at the property, the relevant paperwork and the auction rules.
By bidding, the Buyer accept the terms of the contract on display before the auction, so the Buyer will not be able to negotiate matters such as a longer settlement period.
If the Vendor has agreed to consider pre-auction offers, the Buyer can make an offer through a real estate agent prior to an auction.
The Buyers offer will usually be in the form of a signed contract and the process of negotiation is the same as buying by private sale.
If the Buyers offer is accepted less than three (3) clear business days before the auction date, the Buyer does not receive a cooling-off period (ie time to change your mind).
There are very strict rules about how an auctioneer conducts an auction, and how people attending must behave at all times during an auction.
The auction rules and the auction information statement outlining Victoria’s auction laws, must be on display:
- for at least 30 minutes before an auction commences.
- at the place where the auction will take place.
The auction rules, information statement and announcements the auctioneer must make are set out in the Schedules to the Sale of Land (Public Auctions) Regulations 2014. Substantial penalties may apply to anyone who breaks the auction rules.
Before the bidding process commences, the auctioneer must instruct all bidders of the following:
- the auction will be conducted according to the auction rules
- the rules prohibit bids being accepted after the fall of the hammer
- bidders will be identified on request
- it is against the law to make a false bid, hinder another bidder, or in any way intentionally disrupt anauction
- substantial fines apply to anyone who engages in illegal auction conduct
- whether or not there will be vendor or co-owner bids
- any additional conditions that apply to the auction.
It is illegal to disrupt an auction, but a bidder can still ask questions. During the auction, anyone can ask the auctioneer a reasonable number of questions about the property, the contract, or the auction. If you are bidding, you can also ask the auctioneer to indicate who else made a bid.
Bidding at auction
Auctioneers have different ways of conducting an auction. Generally, they aim to encourage as many bidders as possible to compete, to achieve the highest possible price.
The auctioneer can set the amount by which bids increase. These are called rises or bidding advances.
A bidder can bid at the amount stated by the auctioneer or offer an alternative amount. The auctioneer may choose to accept or reject that bid.
It is recommend that you are clear about your bidding limit. To bid successfully the following is recommended:
- Bid Confidently
- Ask relevant questions of the auctioneer, including who made a bid.
Generally, the amount the bidding advances will decrease as the auction draws to a close.
The auctioneer may:
- Refuse a bid at any time during the auction, including when the auction hammer is falling
- If there is a dispute over a bid, resume the auction at the last undisputed bid or start the bidding again
- Refer a bid to the vendor at any time before the conclusion of the auction
- Withdraw the property from sale at any time.
Vendor and co-owner bids
Vendor and co-owner bids are permitted at auctions. If these bids are to be made at an auction, the arrangements for making vendor and co-owner bids must be:
- set out in the rules displayed before the auction commences;
- announced by the auctioneer at the commencement of the auction.
This is when the auctioneer bids on behalf of the Vendor because the Vendor is not satisfied with the amount of the last bid. This type of bid:
- Can only be made by the auctioneer
- Must be announced by the auctioneer when the bid is made.
When a property is jointly owned, one or more of the owners who genuinely wants to buy the property may bid from the crowd.
Co-owners may bid themselves or through a representative in the crowd but not through the auctioneer.
The arrangements for making vendor and co-owner bids must be:
- set out in the rules displayed before the auction commences;
- announced by the auctioneer at the commencement of the auction.
All dummy bids are illegal and attract significant penalties.
A dummy bid is either a bid:
- Made by the vendor, in circumstances where the:
(i) auction rules do not allow for such bids; and
(ii) auctioneer has not orally announced that such bids are allowed before the commencement of the auction.
- Made by a person who knows that the bid is being made on behalf of the vendor.
An auctioneer must not:
- Accept a bid at the auction if they know the bid was made by, or on behalf of the vendor, unless the bid was in accordance with the law and the auction’s rules on vendor bids
- Falsely acknowledge a bid, where no bid was made.
Also, it is an offence for any person to procure another person to make a bid at an auction that is against the law.
Auction language: ‘on the market’ and ‘passed in’
On the market
The auctioneer may halt proceedings and say they are ‘going inside’ or ‘seeking advice or instructions’ from the Vendor. They use this time to discuss the progress of the bidding with the Vendor.
If the bidding has reached or is close to the reserve price (the lowest price at which the Vendor will sell), the auctioneer will ask the Vendor if they will sell at the highest bid.
If so, the auctioneer will say the property is ‘on the market’. Bidding will continue and the property will be offered to the highest bidder, at the Vendor’s full discretion.
If bids do not meet the Vendor’s reserve, the auctioneer will seek more bids. If bids still do not meet the reserve, the property may be ‘passed in’ or ‘withdrawn from auction’.
The highest bidder then gets first right to negotiate with the Vendor immediately after the conclusion of the auction.
When is the property sold at auction?
There is no legally binding contract until both the Buyer and Vendor have signed the contract of sale.
If You are the successful bidder at the auction, You:
- Will be asked to immediately sign the contract in the terms that were on display prior to the start of the auction
- Cannot make the contract subject to conditions without the agreement of the vendor
- Will not have a cooling-off period
- Sign the contract before the seller, to make your formal offer to buy the property.
The Vendor accepts your offer by also signing the contract:
- The Buyer has to pay the deposit specified in the contract (unless otherwise agreed). When you and the Vendor have signed the contract and the deposit has been paid, the sale is binding and enforceable.
The sale is finalised at settlement when:
- All checks have been made
- The title and transfer documents have been exchanged
- The balance of the purchase price has been paid by the buyer
Paying a deposit at auction
When the Buyer signs the contract of sale after an auction, the Buyer will need to pay a deposit. There are no laws about the amount of deposit but it is usually 10 per cent of the purchase price. Deposits can be made in any way depending on the terms and conditions set by the Vendor’s real estate agent. Before the auction, the bidder (potential Buyer) should check with the real estate agent what options are available to pay the deposit.
If the Buyer is using a bank cheque to pay the deposit, the cheque will be for 10 per cent of the amount the Buyer is prepared to pay for the property. This means that if the property is purchased for less than expected, the Buyers deposit will be more than 10 per cent.
Before the auction the Buyer can ask the Vendor (or their real estate agent) if they will accept a part deposit with the remaining amount due on a specified date. This would require a change to the contract. The Vendor may or may not agree to this arrangement.
The deposit must be held by the Vendor’s real estate agent, conveyancer or legal practitioner in a trust account until the settlement date. The deposit can be released to the Vendor before settlement, if the Buyer agrees.
A Vendor who does not have a real estate agent and takes a Buyers deposit directly must either:
- Pay it to their legal practitioner or conveyancer;
- Bank it in a special purpose account in an authorised deposit-taking institution in Victoria. The account must be in both the Vendor’s and Buyers name.