You have found your dream home! All the necessary checks – such as a pest and building report – have been carried out and you are finally ready to make an offer. It may feel a little stressful, but it is also an exciting time. To make it as seamless as possible, it is helpful to have a solid understanding of the buying process. Knowing all the steps involved can boost your confidence and even your bargaining power.
To do this we need to rewind and start at the very beginning.
Line everything up
Buying a property doesn’t just commence when you attend an open inspection. You need to make sure you are organised beforehand so you can act quickly when you find something you love. This also increases your chances of success, particularly if it is a competitive seller’s market.
Get pre-approval
Before you start house-hunting it is important to have an understanding of your finances – after all, there is no point in inspecting properties that are out of your budget.
Be realistic about the amount you are not only allowed to borrow but can comfortably afford to pay back. To figure this out, speak to a mortgage broker or several banks to see which one can provide the best rate and a pre-approved home loan. It can be tempting to go beyond your means and even if a lender offers this, it may not be the right choice for your lifestyle.
Having pre-approval puts you in a stronger position when you eventually do make an offer. You will have financial proof that you can and will go through with the sale, making you a much more attractive choice to vendors.
Don’t forget if you are a first home buyer there are several Government incentives to help you get onto the property ladder sooner – so don’t forget to check out your eligibility.
Consult with a lawyer
Although not a completely necessary step, it may be wise to consult with a conveyancing lawyer with property purchasing expertise to help you navigate your rights and obligations.
Two main reasons consulting a lawyer is in your best interest:
- Having a lawyer in your corner from the outset can help mitigate any issues around the agreement.
- A conveyancer can help you figure out a deal that works for you from the beginning. For example, including specific clauses or conditions that need to be set.
Consider what conditions you may have
An offer on a property is usually made either conditionally or unconditionally. So, what does that mean?
In an unconditional agreement, the property is purchased in its current state. It assumes that the buyer will proceed with the settlement regardless of finance and the state of the home. This is typical in an auction sale.
A conditional sale utilises the ‘cooling-off’ period and is reliant on the buyer’s finances, completion of the relevant inspections and if any maintenance needs to be completed prior to settlement.
Get the necessary inspections completed
There are various inspections required as part of the sale of a property. This generally includes pest and building inspections to ensure the property is up to code, and that there are no issues with pests or no potential issues brewing. The inspections also help to foresee whether there may be any building issues down the track. When buying an apartment, it is important to review the strata report as this may also highlight any problems such as building defects and upcoming special levies. Depending on your State or Territory, a strata can be purchased from the agent or directly through a strata inspection company..
Review the contract of sale
Well before you make an offer, review the contract of sale. There may be conditions included that become part of a negotiation or that do not suit your requirements. Indeed, there may be conditions in there that force a purchaser out of the game completely. The contract of sale details several factors, including the deposit amount and due date, settlement date, and any inclusions.
Questions to consider
There are several questions any potential purchaser should be asking, and vendors must know these will be coming.
- What is the asking price and why? Understanding why vendors came up with the asking price can be an important part of the negotiation process for purchasers. For example, if it was led by the agent, then it is likely to be a good indicator of the market. However, if the asking price is unrealistically high because the vendor needs to buy their next home, this may impact bargaining power.
- What other offers have been made, if any? Knowing what other offers have been made can give a good indication of the competition.
- How long has the home been on the market? The length of time can indicate how much negotiation may occur - for properties that are on the market longer, buyers may try to negotiate a price decrease.
- Why is the vendor selling? The answer to this can indicate how much negotiation may occur. A motivated vendor who wants to sell quickly may be pressured into selling for a lower price.
- Has the asking price changed through the campaign? This may reflect what the market is performing and the level of interest from other buyers.
Making an offer
Once you have done all the necessary research and have a price in mind that you would like to present, it is time to start the negotiation process.
The first thing you need to determine is how high you can financially go and how high you are willing to go - remember, these may not be the same number.
The top figure that you can afford needs to accommodate moving fees, legal fees and real estate fees (if relevant). Don’t forget to include renovation works that may be required.
Your low figure also needs to be realistic. If you offer way below market value then this may insult the vendor and put them off the negotiation process. Your real estate agent or your lawyer will know how best to approach the situation.
Do not ever assume that your first offer will be accepted. This rarely occurs, so be prepared for a bit of back-and-forth. Negotiating can be tricky and it can be intimidating if you do not feel confident in the process. But there are some things you can do to help:
Research
First, do your research. Remember the asking price is generally a bit lower than the vendor is actually seeking. Keep an eye on how the market is performing. Be sure to look at recent, comparable sales to get an idea of where vendor expectations are likely to fall.
Sticking to your budget
Don’t be swayed by your emotions and over-stretch yourself financially. If this property doesn’t work out, another listing could come up that is perfect. Being able to walk away is also an important part of negotiating.
Making an early offer
Consider strategies that may put you ahead of the competition such as a pre-auction offer.
Some people believe it is best to wait until closer to the auction date. This means the vendor and real estate agent may have a better idea of interest in the property and may be more willing to negotiate or sell prior to the auction.
On the other hand, if a purchaser presents an offer early in the campaign, it may knock out a few competing parties who cannot match the price or get their due diligence done fast enough.
Remember to put your offers in writing. Be deliberate in how you communicate. And always make sure to include any conditions you have when you put forward the price – this shows you are genuine in your offer.
Key Takeaways
- Before you make an offer, do the necessary due diligence, including finance pre-approval, property inspections and consulting with a lawyer.
- There are several questions purchasers should be asking and vendors should keep in mind. This includes why the property is being sold and why the purchase price has been chosen.
- The most important thing to do before making an offer is to figure out what your financial limit is.
- The top dollar price needs to include all other costs involved with purchasing a property including any relevant fees, moving costs and any renovation costs required.
- Check to see what other properties are being sold for in the area. This gives a good indication of what the property should be priced at.
- Do not be swayed by emotions.
Ask the experts
Buying or selling a property does not have to be a nerve-wracking and daunting experience. If you do your due diligence, research your options and understand the process, a negotiation process can be quite exciting as you move one step closer to buying your dream home.
When in doubt, consult the experts. Our team at LJ Hooker is waiting to assist you. We offer you experience alongside excellent market knowledge that helps make the buying or selling process as smooth as possible. As Australia’s number one real estate brand, a little help from the team at LJ Hooker can prove invaluable when it comes to buying your home. Speak to an agent today.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.
