3 Minute Read.
Quite often, finding a property you fall in love with is easy; securing it is the difficult part. You will find making an offer on a property may seem daunting, but using these points you will be ready for the negotiating phase.
What Does Making an Offer Involve?
When you’re ready to make an offer on a house, it must be submitted in writing to the selling agent, who will then present it to the seller. This should be done using an official contract of sale, which includes the seller’s signature within the Section 32 documents.
While verbal offers made in person or over the phone may be considered by the selling agent, they carry less weight than a formal written offer.
Review the contract: Consult your property solicitor.
A property sale contract is legally binding and has the potential to be detrimental to your position if not composed properly. Consulting with a solicitor or property conveyancer is a valuable step to ensure that the contract terms mimic your intentions and settlement needs.
Your legal representative will also ensure that you are aware of the inclusions within the property so there are no nasty surprises on moving day.
There are two documents that are provided to the solicitor,
- A contract of sale.
- Section 32’s, this has a copy of the title, all rates notices, government planning schemes, occupancy permit, plan of sub division with a layout of easements within he subdivision etc.
Tip: Watch out for excessive penalty rates if you are unable to settle on the property on time. This could be a condition of the contract that can be negotiated out prior to submitting an offer.
Determine the type of offer
There are terms that an offer can be subject to, for instance:
- This offer is subject to the buyer obtaining finance within 7 working days. If the buyer is unable to attain finance within this time frame this offer will be cancelled and buyer will withdraw from the contract of sale. And or:
- This offer is subject to a building and pest inspection. If the property is found to be defective and fails a building and pest inspection the buyer can withdraw from the contract of sale. The buyer must complete a building and pest inspection within 7 working days and use a licensed building and pest inspector.
Putting this term into an offer make it conditional offer. Usually, there are two types of offers, conditional or unconditional.
Unconditional offers are final. You are stating that everything in the contract is valid and there are no grounds to withdraw it.
Conditional offers however leave room for the unexpected. Within a conditional offer you can create specific clauses that your offer is dependant on pest or building inspections, or even on finance approval from your lender.
Conditional offers are often preferred by buyers, however vendors may accept a lower financial sum in the form of an unconditional offer as it provides a greater guarantee that the sale will go through.
Make sure you strongly consider what is best for your individual position before making either type of offer.
Always try and use terms within a offer to protect yourself. Buying is long-term financial commitment that needs to be done rite.
TIP: If your submitting unconditional offer, make sure your finances are pre-approved.
Knowing how much you can spend, and working out how much you should spend are two very different things. Once you have consulted with your bank or finance institution to determine your borrowing power, it is important that you consider how much the property you want is really worth.
Determining the limit you are willing to spend on the property is not necessarily the first offer you should submit.
How Much Should You Offer?
Finding a fair and reasonable first offer is essential and is more likely to be received well by the real estate agent and vendors.
An unrealistically low offer can be seen as insulting, antagonising the vendors and making them less likely to offer a reasonable counter.
Check out our article on negotiating for more info on this topic.
Settlement Term:
This is the date you will complete the buyer pays for the property in full, the vendor’s hand over ownership of the property. In Melbourne, it’s normal to have a settlement term of 60 days after the offer is accepted. This gives time for your finance intuitions to organise funds.
Once again, there is no rule around what settlement time frame, it could be 12 months.
A short settlement: 30 days, normal settlement: 60 – 90 days, long settlement: Greater than 90 days.
Deposits:
Once you submit an offer it’s normal to put down $1000 as a good will gesture.
This amount is refundable if you action a cooling of period or a contract condition (finance or building and pest).
It’s also normal for a 10% deposit to be paid once the offer is accepts or the offer becomes un-conditional.
Anything reasonable can be added to a contract using a condition clause, for instance:
- A request to remove an existing structure.
- Vendors to conduct a repair.
- Vendors to include furniture with the property.
Fact: Legally, there is no rule around using money for a deposit. A deposit could be a gold watch, a car, live stock etc.
Checking the structural integrity of the property:
The building and pest inspection report will give you detailed insights into the condition of the house’s interior, roof void, exterior, subfloor, and roof exterior.
This step could save a buyer ten of thousands of dollars after a property is purchased. It could also help you negotiate a lower price if issues are found with the property.
This should be in every written offer as a buyers insurance policy.
Understand the Seller’s Motivation
When the seller is reviewing offers, they will prioritize factors other than getting the highest price, such as preferring a longer settlement period, or a lower risk offer the has a higher chance of failing.
It’s a good idea to discuss with the agent to uncover what’s driving the seller’s decision to sell and how you can tailor your offer to meet their needs, making it more attractive to them.
Cooling-Off Period
If a cooling-off period applies, you have the option to cancel the contract within this time frame.
A cooling-off period is a specific time frame during which you can cancel a contract for the purchase of goods or services if you change your mind. The regulations around cooling-off periods vary depending on the state or territory. If a cooling-off period applies, its details will be outlined in the contract.
This period is also an ideal time to conduct due diligence, ensuring that the condition of the property and its inclusions align with the terms of the contract.
What Happens After You Make an Offer ?
After you submit an offer, the seller can accept it, reject it, or propose a counteroffer, ideally within 48 hours.
If you receive a counteroffer, it’s important to respond quickly, as the seller may accept an offer from another buyer if you delay. Check out our article on negotiating on a property.
If your offer is accepted, the seller is obligated to meet any conditions you’ve set, such as passing a building inspection. This is also the time to finalize your finance approval, usually within a few days, to avoid any delays. Any hold-ups on your end could result in losing both your deposit and the property. Once the seller signs the contract, the property is legally yours!
