How to make an offer on a property
You've made it – after searching and searching, you've finally found your dream home. It has everything you could possibly want, from the well-manicured backyard where your family and pets can romp around, to the charming, bright red front door. It's perfect, and you'll do anything you can to get your hands on the keys.
Making an offer below the asking price can give you clues of how low the seller might be willing to go.
Well, your first step is probably going to involve making an offer to the current owners. Even if there is an amount listed on the home, dependent on certain factors, most sellers will allow a little wiggle room in their ideal price. Knowing how much they are willing to move, and coming up with a suitable offer is a delicate art, one which industry experts are well trained in, but it never hurts to learn a little about the process yourself.
Nuts and bolts of offering a price
In most cases, buying a house isn't like going into a store and buying a hat – even a supposedly "fixed" price may not be the final word. If you're reasonably sure the seller is unwilling to move, it still never hurts to offer lower, even just to save you a couple of thousand dollars. At a time when saving up for a new home deposit can take several years – 4.5 years on average in Australia's capital cities, according to Bankwest – you'll likely agree that every little bit counts.
Really, the worst that can happen when you try to negotiate is your offer will be rejected, in which case you should be free to up your bid or look elsewhere. It's also possible that making an offer below the asking price can give you clues of how low the seller might be willing to go – if their denial is swift then you can reasonably assume you're not even in the ballpark, but if they delay you might find you're close to the mark.
How do I calculate my offer?
What you are willing to offer – and indeed what you can afford – can depend on a number of factors:
- If you're relocating from another house that is yet to be sold, you should have a reasonable idea of what you will get for it. Getting a registered valuation can give you a jumping off point, particularly if you haven't had one carried out for several years. Due to the fluctuating property market, what your house was worth 10 years ago may not even be close to what it's worth now.
- If you're going to seek finance for all or part of the cost of your new home, it pays to get pre-approved. By securing a dollar figure, you're in a much better position to calculate your budget, and more importantly, stick to it.
- Once you find a property you're interested in, either ask to see the most recent valuation, or inquire about having your own valuation carried out yourself if you're not satisfied. The cost of this may also be factored into your home loan, so check with your lender when choosing a valuer.
- Research comparable properties. Your buyer's agent should be knowledgeable about whatever location you are looking in, so check in with them what similar properties in the area have been selling for. Even if they don't know themselves off-hand, their connections to real estate agents mean they should have no trouble finding out.
Once you've done the necessary due diligence, now it's time to bring your offer to the seller. How exciting!
Making the offer
Here comes the tricky part – presenting your offer to the seller. If you've done all your homework, spoken to the right people and are able to explain any potential sticking points, you should be in a decent position to make the seller at least consider your opening gambit, but don't be surprised if they come back at you with a counter.
What you are willing to offer – and indeed what you can afford – can depend on a number of factors.
That said, the Real Estate Institute of Australia stresses that the seller is not obligated to give you the opportunity to increase your offer, nor are they under any obligation whatsoever until the contract has been signed. So, even if they have agreed to your offer, that doesn't necessarily mean it's a done deal – be vigilant in pursuing that signature!
Have a buyer's agent take care of things for you
As you can see, even just this single part of the house buying process can get pretty complicated. That's why more and more people are choosing a buyer's agent to help guide them through each step of the home buying journey. Whether you're new to the game or looking for an experienced advisor, try speaking to your local buyer's agent today.