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.
3 Minute Read.
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.
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.
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.