In the current hot market, buying by private treaty has considerable appeal. Vendors are potentially more negotiable and you avoid the hype of public auction. But there are pitfalls.

One of the main advantages is avoiding the sweaty palms at auction or auctions. Most home buyers go through a string of auctions before securing their dream home.

"If an auction process is in any way a daunting task, private treaty takes the competitive nature of bidding out of the equation," Chris Fitzpatrick, president of the Real Estate Institute of NSW (REINSW) says.

"It allows you to negotiate a price suitable to you. It also might allow you to introduce conditions that suit you, for example, a long settlement time or additional inclusions. With an auction, contracts are produced and all bidding done is in relation to that contract. It's difficult to vary."

Another positive is that buyers are generally more likely to stay within their financial comfort zone, particularly in an overheated market.

Despite the upcoming elections and the international shock waves from the United States, Kevin Sheehan, national president of the REINSW, says the market looks like staying hot.

"There is still a very solid interest rate regime and pressure is downward, not upward. The elections are always a distraction, but any impact would be balanced by the upcoming spring sales," Sheehan says.

The upshot is that if you pay too much now, at the top of a property cycle, and the market drops it could take a decade to make your money back. After the 1988-89 boom, interest rates rose steadily; by 1991 property prices had dropped up to 25 per cent. All of which makes private treaty even more attractive.

In the June quarter last year, private treaty made up about 85.5 per cent of Sydney sales. This year it rose to about 86.4 per cent.

"With private treaty, people don't pay more than they can afford. At auction, they might be tempted to pay a little more," Fitzpatrick says.

That said, when two people want the same property which is to be sold by private treaty a mini bidding war can break out and run until one or other parties relinquish.

Unlike an auction, a private treaty can be like blind bidding. In this scenario, a buyer should set a reasonable price and stick to it.

Another drawback is the increased chance of gazumping. Fitzpatrick's advice: "Be prepared to sign the contract as soon as you do the deal. Within the five-day cooling-off period you can organise finance and get any inspections you want."

You have to request the cooling-off period, as it isn't automatic. Often the vendor's lawyer asks the buyer to wave it and requests a section 66W Certificate, which says your lawyer has explained the contract to you. If you secure the cooling-off period, it stops any other bidders for five days. If there are problems with the property, the buyer is still able to back out.

John McIntyre, chair of the Law Society of NSW's Property Law Committee, says if a buyer does back out 0.25 per cent of the sale price is forfeited.

"For example, on a property of $275,000, you'd loose $687.50," McIntyre says.

For buyers not willing to take this option, gazumping is a harsh reality. "By law, an agent must present any offer to the vendor, be it the same, less or more," Fitzpatrick says. "The handshake deal of the past is not reality anymore."

Greedy vendors have been reported as common. One dubious practice in particular is raising eyebrows. A vendor sets a price for the property, and then advertises it. But when a buyer offers to pay the price the vendor rejects it and asks for more.

Sheehan isn't impressed: "If an owner advertises a price they are morally bound to that price."

And the agent's collusion with this market sleight of hand? "It's not good practice," he says.

McIntyre says this and other similar practices border on unethical and are worthy of government scrutiny equal to that given to auctions.

He cites the practice of agents asking a purchaser to sign a contract for an agreed price and for a deposit cheque. The purchaser leaves thinking he/she has bought the property, but a few days later the agent calls to say the vendor knocked back the offer and has a higher one.

McIntyre suggests buyers urge the agent to contact the vendor and have the contract signed on the spot.

Most inner-city agencies have a list of properties for private sale. These properties can be good buys because vendors may be ready to negotiate.