Everybody is an expert in giving property buying advice. “My broker/solicitor/parent/etc said I should do……” This is something we hear a lot from first home buyers in particular.
Here at Good Deeds Property Buyers we always recommend getting financial advice from an accountant, loan advice from a broker, legal advice from a solicitor or conveyancer and building advice from a builder.
But so many of these professionals also dish out property buying advice including how to negotiate on a property.
And they shouldn’t.
Recently I was dealing with some young buyers who were getting some “free” tips from their mortgage broker on how to try to get their first home. Very well meaning of him except that this was an auction campaign and I am afraid his logic wasn’t going to work in that situation.
Firstly he seemed to be under the impression that they would be able to make an offer and get a 5 day cooling off period. But it is next to impossible to buy a property prior to auction with a cooling off period. The reason for this is that no self-respecting agent is going to put an auction campaign on hold while giving the buyer a chance to back out. This broker was suggesting they would hand over a 0.025% deposit, which simply would not be an option when buying prior to auction.
Secondly, he was encouraging them to make their offer before they had their unconditional finance approval. In a competitive market, it is very dangerous to make an offer when you are not in a position to exchange contracts immediately. If we were to get an offer accepted, we then have to wait however long for the bank to do their valuation. Because the property will still be on the market while they get their finance finalized, in the time between their offer being accepted and the valuation being done, another buyer could come in with a higher offer. It is a cruel reality that gazumping is not illegal in NSW.
Also, if the valuation does not match the offer and the buyer does not have sufficient funds to cover the shortfall, they would not be able to proceed with the purchase.
It is a bit tricky as banks don’t like to do valuations until a price has been agreed – but it is a risky order to do things in. We advise buyers to put pressure on their lender to get the valuation done before negotiations commence. But for this to work, you need to have a sound understanding of the property’s value and what you are willing to pay. Oh, and don’t let your solicitor tell you what the property is worth. Now, that’s another story……..
Published:- 19 Nov 2014
Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.