How to Make an Offer on a Your Dream Home
It can be an intimidating task when making an offer on your dream home. There’s documentation and finances to get in place, negotiations to track, and also what to do after your offer is accepted by vendor.
With the fierce competition in the market many buyers are keen to put an offer in ahead of auction if there is one scheduled. Putting in an offer on the home you want, whether before an auction or for a private sale, is a similar process.
What does ‘making an offer’ mean?
Making an official offer on a house needs to be done in writing and submitted to the selling agent, that will then inform the vendor.
A verbal offer can be made either face-to-face or over the phone however this will not be taken as seriously as a written offer.
The written offer can be in the form of an email, a signed offer form or the signing of a contract, depending on the vendor as well as agent’s preference.
How to make an offer on your dream home…
If you’re serious about buying a house it can seem challenging to have to jump through all the hoops to make it your own. Below is what you need to do to have the best chance of obtaining the keys at the end of the process.
1. Get finance pre-approved
Pre-approval is a good way of gauging whether a bank is going to give you a loan to cover what you need to get the house.
If you’ve engaged the services of a mortgage broker then they will be the go-between between yourself and the financial institution of your choosing.
Contrary to what you might think, however, pre-approval is not a binding agreement and it only becomes so once you’ve fulfilled all the bank’s requirements.
If a home is sold via private treaty, as opposed to an auction, the bank needs to make sure they’re willing to loan you the amount of money you have agreed to pay for the property.
They do this by sending a valuer who will inspect the home and compare it to similar properties on the market. If the bank feels the agreed-upon amount is too much they may want to renegotiate the agreement.
2. Get a solicitor or conveyancer to look over the contract
Having a conveyancer or solicitor on hand to read over contracts is a must. Once your pre-approval is approved (or you’ve decided you don’t need it) it’s time to look for a legal expert who can quickly and efficiently read over a contract.
A quick internet search will help you find someone in your area. You’ll need to find an expert who is experienced with similar types of property transactions as they’ll very quickly be able to let you know if something in the contract is out of the ordinary.
Often you’ll be able to find a legal firm who will read a few contracts and only charge you at the time that your offer is accepted. The sad truth is that many home buyers make unsuccessful offers before having one accepted. You don’t want to be charged for every time you need a contract read, if you’re likely to be making multiple offers.
Another thing to agree upon before proceeding with a legal expert is the liklihood that they will be able to read the contract in a timely manner. If they’re too busy or don’t have the manpower then you run the risk of mistakes being made or things taking too long. Typically you’ll need a contract read within 24 hours.
3. Research similar properties in the area
The best way to know whether your offer is reasonable is to check on the buying section of Paul Hill Reality website and at realestate.com.au/sold where you’ll be able to see the trends in the specific area you’re searching in.
Real estate.com app enables you to stay ahead of what’s happening in the market and keep all your property market research in one convenient place.
4. Attend first open for inspection
If you’re considering making an offer on a property, it pays to show up to the first open for inspection so you can gauge the level of interest.
If the open for inspection is poorly attended and the property is slated for an auction, a vendor may be more likely to consider an early offer.
If you’re at an open house and there’s lots of buyers asking for copies of contracts and asking, ‘Will you accept offers prior to auction’, then you can start to get a bit of a feel of whether there’s going to be a lot of competition.
If you’re not able to get to the first open for inspection, then always ask the agent how many parties have been through and what the interest has been. Forming a good dialogue with the agent is a fantastic way of letting them see you’re serious.
5. Decide on how much to offer and what, if any, conditions
You might think that the highest offer will always win but it’s not the case. A good offer, in the eyes of a vendor, is a mixture of the price as well as the conditions attached to it. Fewer conditions make a more attractive offer, but price is obviously a huge bargaining chip.
Conditions can include being subject to finance approval as well as the property passing a building and pest inspection. Other conditions can include settlement terms and potentially waving any applicable cooling off periods.
Some offers will have both conditions attached and some offers will have no conditions, this is what’s called an unconditional offer.
While every vendor dreams of getting a high price with an unconditional offer the reality is that many houses aren’t perfect, and buyers don’t often have the full amount in cash.
Price
If the home is in great condition and is turn-key then you can obviously offer the amount you feel comfortable with or have been approved for by your financial institution.
It might sound obvious, that you want to offer the highest price, but the property may need repairs which needs to be factored in.
If you have pre-approval from your bank institution, it’s important to remember that this usually covers the purchase price only. Major renovations aren’t covered by a mortgage unless you’ve expressly discussed this with the bank.
Speak to your bank or broker about the best loan to get if you’re wanting to complete major renovations prior to moving in. No one wants to move into their home then not be able to complete any modifications because the mortgage repayments are too high.
Building and pest inspections
If the home is brand new it will be covered by a building warranty, but older homes do not have the same luxury (Builders warranty will generally not cover white ants).
It’s therefore prudent, in many instances, for the buyer to get the advice of a professional property inspector, who may also be a builder, to make sure they’re comfortable with the structure of the property.
Some lucky buyers may know tradespeople that they feel comfortable in seeking advice through, others will want a more formal inspection with a written report.
The inspector will provide you with a written report with all the items they’ve looked at, which will also be given to the agent upon request. Anything in need of repair will come under either a major structural defect or a minor structural defect.
Major structural defects mean the property has not passed the inspection, while minor defects are allowable within the contract.
If the home is surrounded by a lot of trees or there is timber nearby it is a good idea to have the house inspected for termites and other pests by a qualified tradesperson.
Settlement terms
Settlement terms can be a great bargaining chip when it comes to making an offer, if the home is unoccupied then often a shorter settlement will be preferred, but if the vendor needs to find and buy their next home, they may want more than just a few weeks to do this.
The best strategy is to discuss settlement terms with the real estate agent to get a sense for what the vendor prefers. If time is not an issue for you then it can be smart to let the vendor decide.
6. Put your offer in early
If you see that there aren’t many potential buyers at the first open for inspection, the inclination might be to wait a while before putting your offer in, in the hope that the vendor becomes desperate and may accept a lower price.
That strategy often backfires, as it allows time for other buyers to emerge.
Don’t be afraid to turn up the heat on the vendor by putting your best offer out there early in the campaign, and asking for a quick answer (within 48hours), as it will put you in the best position to negotiate.
The longer it takes to get an answer, the more time you give other buyers a chance to reconsider their position or to finalise getting their finance approved or having a chance to get a builder through.
7. Offer your best price
Most buyers who make an offer on a home prior to auction are doing so either because they want to snuff out the competition, or because they’re hoping for a bargain.
We at Paul Hill Realty can tell you that offering low rarely yields results. Those that are most upfront with our real estate agents are the ones who are generally going to be treated as the most genuine buyers.
If you want to buy a home, don’t look at it that you have to buy at the cheapest possible price. If you offer too low, you could miss out, then it could take you another six months to find a similar home again.
Remember: Keep your emotions in check when you put an offer in on your ‘dream home.’
8. Pay the deposit
Depending on which state you’re in you’ll normally have to pay some kind of holding deposit, or an expression of interest deposit, which is held in the real estate agent’s trust account, to make your offer formal. A common deposit amount is 10% of the purchase price but it can differ depending on your situation.
It’s important to know, however, that this still doesn’t mean the property is yours.
If the offer isn’t accepted then the deposit will be returned to you.
9. Get a response from the vendor
Once you’ve paid a deposit you can ask for a timely response to your offer by liaising with the agent.
If the vendor accepts the offer then you’ll have a predetermined amount of time, usually around a week, to have any conditions you’ve attached met.
Bank approval will generally take 14 days and a building and pest inspection will also generally take 7 days to organise and complete.
Once the time is up and the conditions are met then the offer is unconditional. If the conditions aren’t met then it’s time to negotiate or ask for more time or cancel the contract.
10. The vendor signs the contract
Congratulations, you’ve bought a house!
Once the conditions of your offer have been met and the cooling off period has elapsed most of the hard work has been done but there’s still plenty of paperwork to do.
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