You’ve been spending Saturdays driving around to open inspections. You’ve weighed up the pros and cons of each house you’ve looked at. Now you’ve made your decision and it’s time to put in an offer. Where do you start?
Making an offer on a property you have set your heart on can be nerve-wracking. Just like any negotiation process you have to start somewhere but you don’t want to put in too high an offer and pay more than the house is worth, nor start too low and possibly miss out.
Before you put in your offer
Before you even make an offer on a house, be sure to do some legwork. Research the property thoroughly online to determine a fair market price. Look at how long the property has been on the market and check out recent sales of comparable properties in the same area.
Next, ask the selling agent who showed you around the property for some more information.
Ask him or her about any previous offers and what price they think the vendors will accept.
Ask why any previous offers were rejected. Request a second property inspection to be sure this is the house you want and also to get to know the agent and show serious interest.
Once you are sure you want to put in an offer, decide on the maximum price you would be willing to pay for the property and ensure your lender has preapproved a loan for this amount.
Conditional and unconditional offers
Most vendors selling by private treaty, rather than auction, set a sale price above the price they will actually accept to leave some wriggle room for negotiation. If they have a good selling agent however who has advised them wisely, this will be very close to a fair market value.
Having done your research, you will know whether or not this is the case and can decide on a fair first offer accordingly with room for the vendors to negotiate down and for you to negotiate up. It’s not advisable to put in a very low offer that could offend the vendors and stop them from negotiating with you further.
Offers can be either conditional, where you put conditions on the offer, or unconditional. It’s highly advisable to make your offer conditional on certain requirements such as obtaining finance or subject to the results of building and pest inspections. If any problems arise after you have had the inspections done, then you can use these to negotiate lower on price.
Put it in writing
Not all states require that your offer must be in writing but it’s advisable to do so anyway in order to have a record of the negotiations and what each offer and its conditions are.
This should take the form of a formal offer in writing (either letter or email) to the selling agent outlining the price you would like to offer and any conditions.
You can also offer favourable terms to the vendors such as a shorter or longer than average settlement term to sweeten your offer.
The waiting game begins
The selling agent will pass your offer on to the vendors. Be patient, wait and see the vendors’ response and whether they come back with a counter offer. Negotiations can go back and forth for some time, so consider each of your responses carefully and keep your top price in mind.
Keep the tone of all negotiations formal and neutral. Aim for a win-win for both yourself and the vendors and the process should go smoothly.
If negotiations reach your top price, then spell out that this is your limit and you are unable to go any higher. At this stage, the selling agent will likely advise the vendors to accept your highest offer.
Once a price has been agreed, you are on your way to owning your own home. The contract can be finalised and, once signed by both parties and the deposit paid, the deal is completed!