Real Estate

Understanding the 4 main methods of buying real estate

There are a number of different methods you can use to purchase your first home. The processes may seem a little daunting, but with the help of a real estate agent to guide you, you’ll be just fine.

In Australia there are four main types of selling methods auction, private treaty, tender and expresssions of interest.

Each state has different regulations and laws you need to be aware of. So make sure you read about buying in your state and territory on our site.

Private treaty

Also known as a ‘private sale’, this selling method requires the vendor (or seller) to set a price from the start of their campaign.

This enables them to receive and consider offers from prospective buyers throughout the time the property is listed for sale on the market. Through this method of sale, the owner can choose to extend their campaign.

As a prospective buyer, you can submit an offer through the properties real estate agent to the owner and potentially negotiate the price.

Once the offer has been accepted by the owner, there is a cooling off period. This is where certain conditions must be met in order for the sale to go through, such as obtaining finance or a sound home inspection.

Auction

Auctions are a very popular buying method in Australia, as there is a chance of snapping up a property quickly at a good price.

Before the auction day, you can make a pre-auction offer to the owner through the real estate agent. This is where you can submit an offer of how much you are willing to pay for the home. However, in order for your offer to be successful, it needs to be an amount that will attract the owner’s attention.

You will need to register your bid on the auction day to begin bidding on the property.

In most instances the owner will have set a minimum reserve price they are willing to accept for the property. If the bids do not meet or exceed this price, the property may be passed in, or ‘withdrawn’. Should this happen, there could be an opportunity for you to negotiate a sale with the owner.

Some sellers allow part of the deposit to be paid at the end of the auction with the rest on a specific date. This will need to be identified in the contract.

Properties sold by auction are not subject to any conditions, which means you will need to complete an inspection prior to auction day and have your deposit cheque ready to go at the time of sale. Unlike private treaties, auctions do not have a cooling off period. This means you need to be sure this is the property you want to buy.

Tender and expression of interest

These two selling methods are quite similar to private treaty, but they are usually associated with premium properties. They are more formal and both require written offers passed through the agent to the owner.

Expression of interest

• You must send an ‘expression of interest’ document to be sent in by a specific date
• The property price is not always advertised

Tender

• Buyers need to submit a formal proposal as a response to the seller’s tender price
• Buyers compete against one another by submitting offers, but neither party knows how much others are offering, similar to a silent auction
• Properties are usually sold to the highest bidder

Make sure you understand what regulations your state has around the different ways to buy a property.

The home is now (also) an office

Before COVID-19, working from home was, for most, a one or two day a week occurrence and done at an individual employee level. The recent events saw this change, and it is now, generally, a company-wide policy, much more widespread and commonplace to work full-time from home.

Evidence of this shift can be found in our survey of 1,430 people (LJ Hooker, November 2020). It showed that, before COVID-19, 79% of people worked at their place of work and only 21% from home. This evolved over the course of 2020 with 38% of respondents saying that they now work remotely. Furthermore, 36% said that they would still be working from home in 2021, while 64% will be back in the office.

This change already has and will have ramifications for property markets over the coming years. It has made many people think about where they live, how they live, and the functionality of their homes to cater for a new way of living. This often includes seeking an extra room to use as an office space.

If setting up your office every day on the dining table might have been an option to address a temporary situation, it can’t be a long-term solution. When working from home becomes a permanent arrangement, then thinking about setting up a real home office becomes imperative.

This is why some homeowners in this situation might look into renovating or even expanding their homes to create a dedicated work area. Others might prefer to sell and buy bigger, often in a regional area that will offer a similar or better lifestyle at a cheaper cost.

The regional revolution accelerates

More and more people are looking at where they want to live in a post-COVID-19 world.

Not having to commute to the office every day offers many opportunities. Not only it allows to enjoy and a better work-life balance, but it also gives the possibility to look beyond city limits to find a dream home. Indeed, when working from home and searching for a new place, a fast and reliable Internet connection becomes more important than the postcode.

Sponsor: We buy houses in Florence

With more and more companies happy to offer the option of working from home, or even encouraging it, the hurdles that would have prevented a move to a regional area are fading away. This is particularly true for people working in industries designed to embrace remote working, such as IT or Finance. For them, the option of living in their dream location has become a real opportunity that many will want to seize.

Moreover, these remote workers will often be able to enjoy a similar or better lifestyle at a cheaper cost. For a home of a similar size and standard, the rent or mortgage they will pay should be nowhere near what they used to pay in capital cities, where they were forced to live when commuting five times a week to the office. In other words, by making a regional move, they will release the financial pressure and allow themselves to purchase a home without sacrificing their quality of life and even improving it.

For these reasons, towns like Noosa on the Sunshine Coast, Bangalow near Byron Bay or Wollongong and Thirroul in the Illawarra region have experienced a boom since the start of the Covid-19 era. One of the LJ Hooker offices that operate in NSW’s Central Coast region has reported that approximately 90% of enquiries now come from Sydneysiders. In comparison, it only used to be 50% before Covid-19.

Local governments in regional areas have also been quick to see the emerging trend of more people looking to the regions. They are actively providing support and even financial incentives in some cases for businesses to set up within their local towns and regions.

The construction industry to cater for new lifestyles

The construction industry will need to consider the layouts of apartments and houses to cater for work from home and schooling arrangements. Indeed, with new work habits and lifestyle also come new ways of thinking about the home.

After having experienced one or more lockdowns, Australians now want more space in their home and might favour houses over apartments. This often means looking for a place with an extra room to use as an office space. Likewise, dedicated work areas or built-in desks have been in high demand, and this trend should only increase in 2021. Granny flats should also be booming. They appear to be the perfect home office, as they make it easier to keep some boundary between work and personal life.

The good news is that the recent tax cuts that came with the new Federal Budget will provide households with more money in their back pocket. This extra cash will contribute to helping them achieve their renovation or expansion projects. It will also benefit the ones looking at taking a loan to upgrade by increasing their borrowing capacity.

Thanks to government incentives and stimulus measures encouraging them into the market, 2021 should also see first home buyers activity peak. The record-low interest rates, as well as the extension of the First Home Loan Deposit Scheme (which allows eligible applicants to build or purchase a newly constructed home with a deposit of as little as 5%) to offer an additional 10,000 guarantees in 2020-21, will put them in a favorable position to leap.