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How to Make an Offer on a House in 2022

By George Hadgelias

Making an offer on your dream home can be a daunting task. There’s paperwork and finances to get in order, negotiations to keep track of, and what to do after your offer is accepted.

With the intense 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 a formal offer on a house needs to be done in writing and submitted to the selling agent, who will then inform the vendor.

A verbal offer can be made either in person or over the phone but it’s not taken as seriously as a written offer.

The written offer can be in the form of an email, a signed form or the signing of a contract, depending on the vendor and agent’s preference.

How to make an offer on a property in Australia

If you’re serious about wanting to buy a house it can seem daunting having to jump through all the hoops to make it your own. Here’s what you need to do to have the best chance of getting the keys at the end of the process.

Jump to each step:

  1. Get finance approved
  2. Get legal advice
  3. Research similar properties
  4. Attend first open for Inspection
  5. Decide on offer and conditions
  6. Put offer in early
  7. Offer your best price
  8. Pay the deposit
  9. Get a response from the vendor
  10. The vendor signs the contract

1. Get finance pre-approved

Pre-approval is a good way of gauging whether not 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 the vendor. 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 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 sold section of this website at realestate.com.au/sold where you’ll be able to see the trends in the specific area you’re searching in.

Downloading and logging into the realestate.com.au app will enable 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

Jellis Craig Doncaster director Andrew Keleher says 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 or not it’s going to be a strong campaign,” Keleher says.

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, which may have surprising sway with the vendor.

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 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 unconditional offer the reality is that many houses aren’t perfect and buyers don’t often have endless supplies of cash.

Price

If the home is in great condition and you don’t feel the need to change anything then you can obviously offer the amount you feel comfortable with or have been approved for with your financial institution.

It might sound obvious, that you want to offer the highest price, but the home may need repairs which need to be factored in depend on their size and scope.

If you have pre-approval from the bank 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 in to their home and not be able to fix basic things 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.

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.

If the home is in a rural area with a lot of trees and timber nearby it can often be a good idea to have it inspected for termites and other pests too by a qualified tradesperson.

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.

Settlement terms

Settlement terms can be a great bargaining chip when it comes to making an offer too.

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 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 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.

But Keleher says that strategy often backfires, as it allows time for other buyers to emerge.

“Often what happens is over the four-week program we meet a new buyer and second and a third buyer, and there’s new competition that there may not have been if they had have put their best foot forward.”

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, as it will put you in the best position to negotiate.

“If I’m buying a property, I’d want an answer (from the vendor) generally within 48 hours. I want to put pressure on the vendor to make a decision that’s fair, but I also want to put my cards on the table and not hold back,” Keleher says.

“The longer it takes, 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.

But Keleher suggests that offering low rarely yields results.

“Don’t play games with the agent. The people that are most upfront with us 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. Take the attitude that if it’s a home you love and you have stretch yourself a bit beyond what you want to, do it, because it could take you six months to find the same home again.”

“Don’t hold back and say, ‘Look, on auction day we will pay $50,000 more but for the purpose of this offer I want to offer low’, because of course an owner isn’t going to consider it.”

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 and the agent is under obligation to let you know if someone else makes a later offer on the same property.

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 a few days and a building and pest inspection will also generally take a few 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.

If the home hasn’t passed the building inspection then you can consider whether you’re comfortable with the state of the home and potentially lower the offer to cover the cost of repairs.

If the finance hasn’t been approved then you’ll need to ask for more time (which can result in financial penalties) or risk losing the deposit.

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. Read more here about the hidden costs of buying a home.

How much should I offer? Can I offer less than the asking price?

If you decide to offer less than the asking price be sure to have some good reasons for doing so and discuss them with the agent. If the prices in the area are going down then offer proof of the most recent sales.

Remember that the agent is working for the vendor, not the buyer, so it’s their job to get the best outcome for their client.

If you’re offering less than the asking price you can sweeten the deal by not attaching conditions or making it a quick and easy transaction if that’s what the vendor is after. If you can’t do this then you may not be considered a serious buyer by the vendor.

When can I make an offer on a house?

It’s normally best to get in with a formal offer as quickly as possible if that’s the way you’re leaning. If the house is scheduled for auction the closer it gets to that date the less likely the vendor is to accept an early offer.

If I change my mind can I rescind or withdraw my offer?

Once a contract has been signed by both parties, a deposit has been paid and the relevant cooling off period is served (if applicable) it’s difficult to withdraw an offer without being penalised.

If you change your mind at any point before the contract has been signed by yourself and the vendor then normally you won’t incur penalties.

If you do change your mind it’s best to speak with your legal expert and the agent as quickly as possible.

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