Buying your first home is not a one-size-fits-all experience. From the property you’re searching for, to the way you go about buying it, to the loan features that matter most to you, no one’s first entry to the property market will be quite the same.
Most people have a vision of buying at auction and seeing the hammer fall on their successful bid, but there is more than one way to secure your dream home, and each one has different benefits - and conditions - to consider.
Buying at auction
Chances are you’re familiar with the auction process. A house will be advertised for a set period of time (often a few weeks) in the lead up to an auction date, at which interested buyers attempt to outbid one another to secure the property.
Auctioneers make a number of announcements at the start of an auction that outline the rules and regulations attached to the process. These may include prohibiting late bids, false bids or attempts to prevent someone from bidding.
A number of other conditions apply to auction sales. If you’re the successful bidder, you’ll immediately be required to pay a deposit (usually 10%), and the sale is final, with no cooling off period. There is no opportunity for negotiation and settlement periods are often set by the vendor.
With a private sale (sometimes known as private treaty or sale by negotiation), the vendor advertises the property for sale, along with an asking price (or price range).
Prospective buyers will inspect the property and then submit offers, generally through the real estate agent who will act as the vendor’s advocate in the sale. Offers can be accepted or rejected, or the agent may enter a negotiation with the prospective buyer to meet a more favourable agreement.
Naturally, a private sale does away with the often stressful experience of bidding at auction, where some buyers find themselves swept up and enticed to spend more than they planned, or otherwise are left disappointed when a property sells for much more than expected.
For many, this is a significant advantage as it allows buyers to have much greater control over the price they pay, away from the auction adrenaline high. As well as this, private sales contain a ‘cooling off’ period - for example in Victoria, if you purchase a residential and small rural property there is a three-day window during which you may reconsider and cancel the sale (subject to certain conditions).
Because a private sale is negotiated, there is also the opportunity to add conditions. For example, you may negotiate to make the sale subject to a building and pest inspection, or subject to your ability to secure a loan (referred to as a finance clause)
Private sales can be a longer process and a more challenging way to find property, but for the patient buyer they can also provide greater flexibility and the chance to ensure added protections.
Expression of interest
Sale by expression of interest (EOI) is similar in many ways to a private sale, in that the property is placed on the market (generally for four to six weeks) and prospective buyers are invited to make an offer before the closing date. EOIs are often favoured when a property needs to be sold within a short time frame.
Where an EOI differs is buyers must provide a ‘best and final’ offer in writing, along with any conditions, and vendors wait until the closing date before considering all EOIs and proceeding with their preferred option. This means there is less flexibility in negotiating with multiple interested parties and over a period of time, and buyers must be prepared with any conditions when they submit their EOI, such as settlement details or making the offer subject to finance.
When searching for your dream home, keep in mind that the way you buy it can impact the flexibility you have to set your own price, terms and conditions. While some options put more power in the hands of the buyer, knowing what to expect will put you in a better position to succeed, regardless of the method of sale.
Remember that finance clauses and other procedures differ between states, so be sure to do your research into how these conditions apply to your situation before committing to any purchase.
Need some personalised advice on approaching your first property purchase? Contact the expert team at BFD Finance today to learn more about how we can support you to secure your dream home and protect your future financial success.