In the current environment, with auctions seeing reduced activity, there is once again more focus on private treaty sales.
A key part of the sales process when using a private treaty is the offer and acceptance process. Understanding what makes a strong offer is not only important, it could potentially help you achieve a positive outcome.
When making an offer on a property, it’s important to understand the implications of what that offer might look like to the vendor.
Here are five things to consider before making an offer.
Understand a Property’s Value
When a real estate agent lists a property for sale at a given price, they are generally going to be using comparable sales data to get a better picture of what that property might be worth.
They will be looking at properties of similar size, age and land component and trying to determine how much demand that type of product is receiving in the current market.
The first step to putting in a strong offer is to know the market, as well as the sales agent. You need to monitor recent sales and see how fast properties are selling and at what price.
After examining what’s been selling in the vicinity of your property of interest, you need to then focus on why the vendor is selling.
While this information might not always be made available to a potential buyer, speaking with the agent is usually the best way to get a better understanding of the vendor’s position.
As a general rule, a vendor that needs to sell quickly for personal reasons could potentially be willing to accept a lower price to make that happen.
Consider Your Conditions of Sale
One of the big differences between buying at auction or via private treaty is the buyer is often able to include a range of conditions.
Conditions are generally things like ‘subject to building and pest inspection’ or a ‘subject to finance’ clause.
From the vendors perspective, the fewer conditions you attach to the offer, the more appealing it is. However, a vendor is far more likely to accept an offer with multiple conditions attached if the price is what they want.
Always Put an Offer in Writing
An offer is always going to be far more effective if it is in writing. In fact, a vendor has no obligation to even consider a verbal offer.
As a buyer, you could potentially even start negotiating against yourself if you don’t have an offer written down.
Having Finance Pre-Approved is Vital
These days a ‘subject to finance’ clause is virtually never going to be a deal-breaker for a vendor. Most people buying or selling a home understand the role finance plays when large sums of money are involved.
As a buyer, you can have your finance organised well in advance by way of a pre-approval. A pre-approval is something that you can use to show the sales agent you’re a serious buyer, which could help get the deal done.
Likewise, a pre-approval will give the vendor more confidence in your offer. This could be important if it is a hotly contested property with multiple offers.
The good news is, a pre-approval is something you can talk to your mortgage broker about well in advance. It will help you get a better understanding of what you will be able to borrow and therefore how much to spend. If you’re constrained by your borrowing capacity, this could also be a good negotiating tactic.
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