A growing number of sales methods and terminology are hitting the property scene, some gaining popularity, but others make prospective buyers scratch their heads. Here’s a quick guide to coding some of the most frequently-used real estate sales jargon.
A public sale held at a specific place, time and date after a marketing campaign over several weeks. An estate agent acting as an auctioneer conducts the auction, which is governed by strict rules. Buyers call out bids to the auctioneer, who can also make vendor bids to move the auction along. The auctioneer will announce the property is ‘selling’ or ‘on the market’ when it reaches vendor’s reserve, and knock it down to the highest bidder after calling it three times. If the bid fall short of the reserve, the property is passed in to the highest bidder, who has exclusive rights to negotiate with the vendor.
Pro: Buyers can see who their competition are, so it’s very transparent.
Con: There is no cooling-off period.
It’s an auction for only registered bidders with doors closed to the general public. It’s a sales method favoured by vendors who value privacy and don’t appreciate the fact that anyone can walk through their property. Private auctions are often held mid-week rather than on a Saturday.
Pro: It is transparent and private because there won’t be a large crowd of gawkers.
Con: Auction conditions apply, including no cooling off period.
Another example of a private auction where all serious buyers gather in a room, usually in the agency office. It is often triggered before an auction when a buyer makes an acceptable offer, and it gives other interested buyers an opportunity to bid. An auctioneer conducts the auction and the property is ‘on the market’ from the get-go. If the boardroom auction is held more than three days before the auction, there is a cooling off period.
Pro: Like a private auction, it is a transparent and private way of buying property.
Con: Can be a little bit intimidating being in the same room with a number of people who are also serious about your dream home.
The property is either advertised with a price range or to contact the agent and interested buyers can make an offer by signing the contract of sale. The seller and buyer negotiate on a price – usually through an estate agent – and the contract can be conditional, subject to a building inspection report or obtaining a loan. For residential and rural properties less than 20 hectares, there is a cooling off period of three business days.
Pro: There is more flexibility for negotiation on the terms of the contract.
Con: Buyers can’t see who their competition are and may be paying above market value.
Expression of interest/Tender
This sales method can vary from agency to agency, and may not be as rigid as what some property websites say. Prospective buyers are invited to make offers by a specific time and date over a marketing campaign spanning several weeks, but the buyer and seller can reach an agreement before then. Serious buyers put forward their best and final offer in writing, which can include terms and conditions such as settlement dates and finance conditions. If no acceptable offers are received by the EOI closing date, the property could go back onto the market for private sale.
Pro: Buyers can make a conditional offer, subject to a building approval certificate or financing.
Con: All bids are confidential and the seller has control over the process.
Sale by negotiation
Sales by negotiation is a private sale method, so the same rules around cooling off periods and conditions apply. It is one way for agents to start a conversation with buyers about price just like properties advertised with ‘Price on Application’. Agents will guide the buyer around price but won’t necessarily reveal what the vendor will accept because it may be lower than what several buyers are willing to offer.
Pro: Less urgency means potential buyers aren’t compelled to make a decision on the day like an auction.
Con: No advertised price range can be frustrating for buyers, though an advertised price should only be used as a rough guide. Savvy purchasers would do their own research and look at recent comparable sales.
Sale by set date
It’s essentially a private auction, a combination of both the private sale and auction methods. A home is usually marketed over four weeks and advertised with a deadline. Buyers can submit offers at any point of the campaign, which the vendor can choose to accept. If the vendor receives an acceptable offer, all registered buyers are contacted and have 24 hours to the close of business the following day (except Sundays) to submit their best final offer, which won’t be disclosed to any other buyers. ‘Sales by set date’ is a registered trademark by Barry Plant.
Pro: Great for sellers who value privacy, without loosing the urgency and competition of an auction campaign.
Con: Buyers lose the transparency of a public auction where they can see who their competition are.
These are properties that never hit the market and where deals are quietly reached behind closed doors. It’s another private sale method where buyers and sellers negotiate through an agent. It could be initiated by a proactive buyer who is asking about upcoming listings/ on an agent’s database or a private vendor who prefer to sell quietly.
Pro: There could be less competition because it hasn’t been advertised.
Con: Buyers who don’t do their research thoroughly risk paying too much.