By STEPHEN HART

Most homebuyers spend Saturday mornings scanning the property pages in order to compile a list of prospective properties and plan their visits to open homes. First they choose their target neighbourhoods, say Mt Eden, Sandringham and Kingsland. Then they try to find the homes for sale in those areas that are within their price range, say $600,000-650,000. This is where things start to go horribly wrong.

Frustratingly, many of the listings will have no asking price; not even a price range. And I'm not talking about properties that are being sold by tender or auction here; I'm talking about houses listed as "for sale by negotiation".

What are buyers supposed to do? They don't want to waste their time pointlessly viewing properties that are way above their budget. But if they don't, they run the risk of missing out on a property that may well be ideal for them and available within their price bracket.

Just what sales tactic is the real estate agent employing here on behalf of the seller? Do they want to attract people to the open home who can't actually afford the house? Do they think that somehow a buyer will just fall in love with a place and abandon all rational thought about his budget? In my experience, a significant number of buyers simply exclude properties advertised without a price from their open home list.

So, why the apparent popularity of sale by negotiation? Does it really work for the buyer or seller?

It seems this choice of sales method, like auctions, is symptomatic of the residential sales boom of the last few years. There are two main reasons it exists:

Over-enthusiastic buyers

In boom times the market is awash with buyers chasing a limited number of properties. Buyers are caught up in the frenzy of having to move quickly and decisively to secure a property before house prices rise further. Quite simply, many buyers pay far too much for properties. Who knows what a prospective buyer might pay for a house in this sort of boom? It could be argued that putting an asking price on a house only limits the nature of offers when it seems the sky is the limit.

Over-optimistic sellers

Sellers have read all about the property boom. They have heard exaggerated anecdotes of how a house down the road is now on the market for $1 million having been bought for only $500,000 two years ago. They see this as their chance to cash in on the boom. The sellers have higher expectations than their real estate agent about the market value of the house, especially in a softening market. Faced with this scenario it is difficult for an agent to temper the vendors' enthusiasm without disappointing them and risk being dropped for another agent who apparently shares their optimism. An easier option is to list the house as for sale by negotiation and try to get the vendor to accept a more realistic price once would-be buyers provide market feedback.

So, what should buyers do when faced with the dreaded "sale by negotiation"?

See the houses that fit your criteria; don't ignore them.

Have a firm idea about your budget and stick to it.

Ask the listing agent for an indication of the vendors' price expectations.

Ask the agent for local sales information and compare the prices achieved for similar properties.

Make any offer conditional on a satisfactory valuation.

I suspect real estate agents are as frustrated by sale by negotiation as buyers. If a vendor wants to find out what price a property might attract, they should sell the house by auction or tender. If not, then a property should have an asking price. As the market swings more in the buyer's favour I predict we will see the term "sale by negotiation" less and less - thank goodness!

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