Making an Offer – Where to Start
You really want a property and are keen to put in an offer but where do you start? No one wants to pay more for a house than we should, so how do we get the best deal? What is the magic figure to start the negotiation process?
Making an offer on a property is similar to playing a game of chess – each party waiting to see what move the other party is going to make. And unlike other transactions, where there is a set price and little room for movement, there are generally no set prices or rules!
What is the process?
The process of making an offer on a property can vary from state to state. For some areas, the first offer can be verbal, for others it is written.
Before entering the ‘game’, understand the rules and preferably make the offer in writing – this eliminates any confusion concerning what the offer and conditions were.
The negotiation process begins when you first meet an agent. They will form an impression of you, ask loads of questions to understand your situation and formulate an idea of what you might pay for the property and your budget.
Before getting to the offer, this relationship with the agent might consist of a number of phone calls, second and third visits to the property and possibly some inspections. During this process and before you make an offer make sure that you:
- Have a clear understanding of the process. Get the agent to explain how they intend to make an offer. Check with your solicitor to ensure they are happy with this. Remember to seek advice from third parties, as the agent and vendor do have a vested interest.
- Know what price you want to pay for the property and work out your strategy to accomplish this. For example, starting 15-20% below the asking price, assuming that the agent has already added a 10% onto the asking price on what the vendor really wants.
- Researched the property fully and have satisfied all your requirements.
- Have studied other comparable properties that have sold in the area recently. The agent will be able to provide you with this information, but they may not give you a complete list. You can also get this information from companies such as RP Data.
- Have an understanding of the vendor’s motivation to sell, their preferred settlement date and any other information that may make your offer stronger.
- Have patience. Some property offers can take a while and they can be stressful. Don’t rush offers if you don’t need to. Read the signs from the agent and don’t necessarily accept their urgency on your next offer.
Should I get a Valuation?
It is definitely worth getting a registered valuation on the property. Although this is generally done as part of the loan process, your negotiations would have already taken place.
If you want to get your offer on the table, you can always add a condition that it is subject to a valuation. However, the vendor might not accept this condition and you might miss out on the property.
If you are thinking about getting a valuation as part of the offer process, check with your lender to enquire which valuers they use to make sure it can be accepted as part of the loan application – you don’t want to pay twice.
Three questions to ask before making an offer
- Have there been any offers made to date? If so, what were these and why were they rejected? Sometimes it is not the price offered which has seen an offer rejected. It might have been due to settlement dates and/or conditions. You don’t necessarily have to up the ‘price’, it may be just changing (adding or deleting) another condition.
- Did you set the asking price or did the vendor? This question will give you an understanding of whether the vendor has an asking price they are looking to achieve. It may be that they are being unrealistic or need a certain amount for a particular reason, for example, buying another property.
- When did the property come onto the market? Are you the first agent to offer the property for sale? Has the asking price been reduced at all? This question will give you a handle on whether the vendor might be ready to negotiate.
Common mistakes made when placing offers
There are some common mistakes people make when making an offer. Don’t fall into this trap.
- Playing games. Be upfront if you are interested in the property. You don’t have to give an agent your life’s history but enough information for them to know to contact you and keep you in the loop if there is movement on the property.
- Not researching. You can’t make an informed offer if you haven’t researched the market and the property.
- Talking the property down. This just gets people off side!
Written by: Charlotte Cossar