Wednesday, June 29, 2022
HomeReal EstateMaking an Offer on a House

Making an Offer on a House


Key takeaways

The asking price quoted by the selling agent will usually be more than the owner is willing to accept.

We all want to buy our new home or investment property at the lowest price possible.

Or at least get good value for our money.

And of course, the vendor wants the most he can get for his property, especially in today’s market where property values are strong.

Buying Home

Yet you now know that the asking price quoted by the selling agent will usually be more than the owner is willing to accept.

It’s just part of the real estate game – they expect to come down in price as part of the negotiation process.

So when making an offer on a house, what should you do?

House asking price vs offer price

You are probably thinking that the agent just wants to make a sale, and in most cases you are right – in reality, the agent doesn’t get paid unless a sale is made, so obviously, he is keen to sell you the house.

But most agents prefer an easy negotiation, knowing that sellers get offended when they receive low offers on their homes.

This means they will probably recommend you make an offer close to the asking price.

So unless you use a buyers’ agent to help you negotiate, you are really going to have to rely on your own research to work out what the property is worth.

By the time you end up at the negotiation table, you should have put some of these into practice, looked at many homes, and gotten a pretty good idea of what similar homes in the area have sold for.

Remember, it’s the sale price, not the asking price that you need to focus on when you’re doing your pre-negotiation homework.

In most markets (other than during boom times), houses sell for considerably less than their asking price.

There is no standard discount, but as everyone knows there will be some ‘argy-bargy’ about the price as agents tend to list the property for sale at an asking price usually about 5-10% more than the vendor will accept to sell their home.

If you pay what the seller is asking you could be wasting money.

The trick is to know how much less the seller will accept.

Sometimes it’s only a few thousand dollars.

Frequently it’s about 10% or more, but in a seller’s market – a hot market, where there are multiple buyers making an offer on a house like we are now experiencing – vendors may not be willing to drop the asking price at all.

Is it worth getting a valuation?

Another way to determine the market value of the home is to have a valuation done.

Your lender will usually organise a valuation as part of the loan process, but this will occur after the deal has been done.

I’ve heard some people wonder if it’s worth having a valuation done prior to making an offer on a house or making their offer subject to a satisfactory valuation.

Not many sellers accept this type of condition and it’s possible you will lose out to somebody else who will buy the property without this type of condition.

The trouble with engaging a valuer is that it usually takes 3-4 days or even up to a week before you get their report, and it may cost you $400 to $600.

If you have the time and want a professionally acquired figure, then a valuer may be the way to go.

Home Valuation

The valuation report may even provide you with ammunition to use in the negotiation process.

While your lender will require a valuation on the property as part of your finance application, not all valuers are approved by certain lenders.

Each lender only works with a small group of valuers (called their valuation panel).

This means that if you pay for a valuation for your purposes, it may not be accepted by your lender.

And remember that if you ultimately don’t buy the property, you will still have to pay for the valuation.

So to help you determine what price you should offer if you’re considering buying a house I’ve put together 10 steps for how to make an offer on a house, and 5 questions to ask the agent before making that offer.

10 steps to making an offer on a house

Here’s what you need to do to have the best chance of making the home your own.

1. Get your finance pre-approved

Pre-approval is a good way of gauging whether or not a bank is going to give you a loan to cover what you need to get the house – a mortgage broker can help you with this.

Remember, pre-approval is not a binding agreement, and it only becomes so once they’ve checked and approved the particular property you have chosen and you’ve fulfilled all the bank’s requirements.

2. Consult a solicitor or conveyancer

Before you make an offer, you may wish to first consult with a solicitor or conveyancer who can outline your rights and obligations.

An offer placed on a property can become a legally binding contract if it’s accepted, so engaging a lawyer early in the process can help mitigate any miscommunication surrounding the agreement.

3. Research similar properties in the area

The best way to know whether your offer is reasonable is to look at trends in the specific area you’re searching in.

You need to research similar properties in the same area to get a good gauge of what the property is worth.

4. Consider what conditions of sale you might have

An offer on a property is usually made either conditionally or unconditionally.

An unconditional agreement means that the property is purchased in its current state.

Conditional sales usually occur when the purchaser already has pre-approval, an inspection has been completed, and the buyer is happy with the property as it stands.

A conditional sale, which gives the purchaser more flexibility, is a sale with conditions attached.



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