How to make an offer on a property?

One of the most common ways people buy a property in Australia is by Private Treaty – this is when a property is listed for sale with an asking price and potential buyers make offers in writing to the real estate agent who will then presents it to the vendor for consideration. Typically, negotiations go back and forth between the buyer and seller (via the real estate agent), until an agreed price is reached.

The seller usually lists the property for sale at their desired price, or sometimes higher to allow room to negotiate and the buyer will typically try to find the lowest price the vendor is willing to sell for.

Deciding on what to offer first up can be difficult. Before you make an offer, make sure you understand the value and growth of the wider property market, the suburb and neighbourhood and the popularity of the suburb you are looking at buying into. By doing your research you’ll be in a better position to judge whether the home has been priced fairly and how much you are willing to offer.

You may wish to start with your best offer, especially if there is a lot of interest in the property or you could start with a lower offer and be prepared to negotiate up. The risk with starting lower is that you may lose the property to another purchaser who comes in with a higher offer.

If you do not have the luxury of time, perhaps when the market is very strong and there appears to be a number of people interested in the property, determine the maximum amount you are prepared to pay and make this your first and last offer. Sell my house in Columbia!

It is best to have your finance pre-approved so the seller knows you are serious and able to act immediately, however you can make your offer subject to finance, which will give you a limited time in which to receive confirmation from your lender that finance will be made available to you.

Conditional offer versus un-conditional offer

When you submit a written offer, you’ll also need to include any special terms and conditions for the sale of the home. For example, you may wish to have a longer settlement so you can sell your previous home, or perhaps the owner needs to fix up a certain part of the home. These conditions need to be included in the offer and the final contract of sale. Here is an overview of the different types of offers:

Conditional Offers is a binding contract to buy a property, subject to certain conditions being met. If these conditions are not satisfied, the buyer has the legal right to back out of the contract. Common conditions may include subject to valuation, subject to finance or subject to a building and pest inspection.

If your offer is unconditional, it is an outright offer to buy a property. You should be 100% sure that this is the property you want and that you have access to the money to buy the property. Legislation and the process of buying a property by private treaty varies from state to state, however typically speaking, once the vendor has accepted your offer, you are legally obliged to go through with the sale or risk forfeiting your deposit.

Whether you are negotiating a conditional or unconditional offer, it is advisable to speak with your solicitor or conveyancer about your rights and all terms of the contract before you sign anything.

Negotiation skills

The asking price is there to provide buyers with a guide of how much the owner is willing to accept for the property. However, this price is negotiable. Determine what your budget will be and pitch an offer below what you’re actually prepared to pay.

Don’t reveal the maximum amount you’re willing to pay straight away. Instead, work your way up through negotiations with the agents and the seller.

Don’t get too emotional

Although private treaty sales do not see the heat that auctions can get, it’s still important to not become too emotionally tied to the home you want to buy. Leaving your emotions out of the equation will help you to negotiate with the agent. It will also reduce the risk of potentially blowing your budget if you become too attached to the home.

Making a pre-auction offer

Making an offer isn’t only restricted to Private Treaty sales – it is also possible to make a pre-auction offer on a property you are keen to buy before auction day.

Questions to ask a home loan consultant

Are you looking to get a home loan but not sure where to start? Here are 10 important questions to ask home loan lenders to ensure you are choosing the right partner for you and one that is best aligned to your individual circumstances:

What is the comparison rate?

The comparison rate is the rate that helps you work out the true cost of a loan. It helps you assess the interest rate plus most fees and charges relating to the loan. Using this to compare different lenders and different loans is important and gives you a much clearer view of which option is the best for you

What is the best rate you can offer me? Do you offer any first home buyer discounts?

The home loan industry is super competitive so it’s worth asking what’s the best rate they can offer you. You may be able to negotiate with your lender about the interest rate being offered. Additionally, sometimes lenders will reduce or discount the application fee for first home buyers or offer a honeymoon interest rate for new applicants so ask if this applies.

Are there any other fees that I need to be aware of?

Making sure you understand the different fees that are not included in the comparison rate such as Government and statutory fees, lenders mortgage insurance or valuation charges and event based charges such as redraw fees. Whilst you may not be planning on redrawing on your loan, knowing what you are up for in the future helps with your planning.

What documents do I need to provide for my application?

Different lenders have different requirements here, so make sure you ask for clarity around exactly what they need from you to consider your application. Ensuring you submit all the information will ensure they can process you request quickly. The most common documentation includes proof of income, bank statements and any loan documents from previous loans. Be prepared as they require a large amount of documentation.

What repayment options do you have?

Making sure you understand the lenders repayment schedule is key to ensuring you have the funds available at the right time. Most lenders will offer monthly, fortnightly or weekly repayments. Be sure to check your lenders repayment policy to ensure they match with your earnings.

Will a default on my credit report affect the loan?

A default can be listed on your credit report and will last for five years. It does highlight to a lender that you have failed to pay a loan back in the past and whilst they are wary of this it doesn’t necessarily stop you from getting loan. The type of defaults that you have, how old they are, if they are paid, the total number of the dollar value of the defaults are all taken into account my lenders. It is best to talk to your lender about this as some are more flexible than others.

Are there any fees or penalties payable on this loan?

Most loans incur additional fees. Ask your lender for a full list of the fees as you’ll need to make sure you can pay these fees as well as the loan. In addition, borrowers sometimes charge fees for paying off a loan earlier, particularly with fixed rate loans. Make sure you find out about any prepayment penalties before you sign off on any loan. You may not be keen to pay a penalty if you pay off your loan early.

How much deposit do I need?

Generally, lenders are willing to finance home purchases of up to 95% if you have a very strong employment and savings history. Keep in mind you may have to pay Lender Mortgage Insurance if you are borrowing 95% of the property’s value. It may be a better idea to keep saving your deposit to avoid the additional expense.

Are you a member of a professional organisation?

Whilst lenders don’t have to have a membership of a professional organization, the ones that do, operate under stricter guidelines than those who don’t. If your lender is a member of the MFAA or FBAA it indicates they meet some exacting professional standards and gives you peace of mind

Why should I choose you rather than another lender?

This is a big decision, so before you settle on a particular broker, you should challenge the lender with this question. Make sure you drill into the detail behind their answer “What specific things you make you better than another lender?”, “what exactly do you do to deliver great service?”.