How to Make an Offer on a House in 2022

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.”

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 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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