Making an offer on a property is a process that seems to be shrouded in mystery. Getting to grips with what’s involved will bring you closer to your first property purchase.
Before you consider making an offer, you need to understand your budget, how you’re required to make an offer in your state/territory, and have an idea of the value of the property.
1. Private Sale
In a private sale the vendor (seller) sets a price or price guide for the property then negotiates with potential buyers, usually via a real estate agent.
The negotiation happens until a price is accepted by the vendor. You can withdraw your offer at any point before the vendor formally accepts it. Generally negotiations could begin below the asking price and work their way up.
A key benefit of buying by private sale is the opportunity to make an offer subject to conditions such as obtaining your finance, reviewing the contract of sale and being satisfied with the results of the building and pest inspections.
2. The role of the real estate agent
In most cases, the agent will be the primary person you deal with. When an agent is engaged, they are acting for the vendor. But they want to make a sale happen, so take the time to find out what you can from them. They may be able to give you an idea of the preferred conditions for the sale, the reasons for selling or how popular the property is.
And don’t be shy about letting them know that you are interested. While you may not wish to reveal your budget, you could let them know you plan to make an offer, and make sure they can get in touch with you.
With an auction the vendor (seller) sets a reserve price which is the minimum amount they’ll sell the property for at the auction.
When a property passes its reserve price at auction, the property is on the market and the highest bidder effectively commits to buying the property. That’s why you need to do your due diligence before the big day.
Your broker can help take some of the mystery – and stress – out of an auction by ensuring you are ready with your pre-approval, property report and property deposit for the big day.
TIP: Attend at least one ‘practice auction’. It’s a great way to get the hang of how auctions work and observe the type of environment you will be in when you decide to do it for real.
4. What to do before making an offer
Ideally before making an offer or attending auction:
- Ensure you have loan pre-approval in place
- Carry out building and pest inspections
- Have a professional review the contract of sale
- Understand auction rules in your state or territory
- Be ready with your deposit
- Know your limit
- Be ready to sign the contract of sale.
After the offer or auction:
- Call your broker to discuss the next steps
- Consider taking out building insurance
- Celebrate once successful!