How to make an offer on a house or apartment

 

Property buyers need to know how to make an offer on a house or apartment so that they don’t act too fast and overpay or, conversely, muck around and end up missing out to another buyer.

The fundamental rule to follow under most circumstances is not to make an offer until you are ready to sign on the dotted line. So, what do you need to do to get ready?

First and foremost – get your finance approved and deposit arranged!

And when you find the property you want to buy, do your research. Look at recent sales and compare with the one you’re looking at. Be detailed – look at size, condition, aspect, street, etc. Then be ruthless – which ones are better than the one you like and which ones are inferior?

Recognize that your emotions are probably driving your decision making. For instance, don’t let fear of missing out lead you into paying too much before auction. In a slow market agents often encourage buyers to make pre-auction offers. Before you do, step back and really consider how strong the market is and whether the auction is likely to be competitive or not. Holding out to the auction can often pay dividends for a patient buyer.

That said, work with the agent, not against. Don’t play games – it’s unlikely that you’ll be able to out-play the player. Let them know you’re interested and ask them what their negotiation process is. Agents do have favourites and they are more likely to give you information you if you show them respect.

Realise that not all agents are the same – we’ve identified 8 different types and they all work differently. Using the same negotiation strategy every time simply won’t work.

Set your maximum limit BEFORE you start negotiating and then pressure test it. Run through scenarios beforehand to work out your true walk away price.

There are 5 elements to consider when setting your maximum price:

  1. Your price research and where this property sits in the market
  2. Whether the market is hot or not
  3. How popular this type of property is
  4. How uniquely it suits your needs
  5. What you can afford.

When you are ready to make an offer, understand that the most powerful offer is an unconditional one. That means you’ve done all of your due diligence and your offer won’t be subject to anything. I’ve included a link to our due diligence checklist here.

Lastly: don’t forget to walk away if the price goes over your pre-set limit!

PS – I didn’t mention this in the video but it is important to recognize that sometimes the actual price is not the most important thing to a vendor. Consider the terms of your offer. It’s a good idea to ask the sales agent whether the vendor has any specific conditions that would make your offer more favourable. For example, a long settlement might suit a vendor who hasn’t yet bought, or maybe you could offer a rent-back period. While a short settlement might appeal to a vendor who has already bought their next home.

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Further Reading:

Guide to understanding real estate auction underquoting laws

 

Should you bid against yourself?

Published: 11 July 2018

DISCLAIMER: Good Deeds blogs/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.

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