There’s a new method of sale that’s emerged in WA called ‘open negotiation’.
Conceived by some local Perth agents, open negotiation aims to combine the three common methods of sale typically used in WA; for sale by private treaty (which accounts for approximately 95 per cent of all transactions in the state), auction and tender.
How open negotiation works
Open negotiation works by inviting buyers to submit offers with conditions of their choosing in the lead up to a predetermined date of purchase (a little like a tender). If the seller approves their terms and conditions, they can then participate in the open negotiation via the ‘Openn’ app.
Participating buyers are asked to submit an opening bid. The first opening bid sets the advertised price for the property and if a higher opening bid is submitted than the first one, this becomes the new advertised price.
The appeal of open negotiation is that it is a transparent method of sale, which allows buyers to view all bids, the number of bidders involved and how much time they have left to bid. This continues until a final unchallenged bid is made that is above the reserve price.
How does it compare?
You may think this sounds like an auction. There are definitely some similarities between the two, for example the method requires a licensed auctioneer to oversee the process. One of the biggest differences however, is that open negotiation allows for each buyer to have pre-agreed different conditions of purchase. By comparison, at a public auction, the terms of purchase (i.e. deposit amount and settlement terms) are the same for all buyers.
Open negotiation also differs from the common private treaty ‘for sale’ method by revealing the price of each buyer’s offer to all other participating buyers. When buyers compete for a property under private treaty, the details of each offer are usually confidential. Open negotiation on the other hand is completely transparent for all parties.
Purists espousing the virtues of the auction method of sale point out that open negotiation fails to deliver absolute certainty to the seller. This is a fair point as it’s possible that the winning buyer’s offer may be subject to a finance approval, which may lead to the buyer not being able to settle the contract on the agreed date.
While auction remains the most pure, transparent method of sale, not all buyers can participate in the process. Open negotiation neatly fills the gap between a private treaty and auction sale.
Author: REIWA President Hayden Groves
