Property Purchase & Negotiating Tips.

July 01, 2016
Chris Kirwan

Before you find a property

  • Get a pre-approval. Make sure you have your finances in order and have an idea of how much you can afford to borrow and repay. Talk to Brian who can help to research and compare different lenders and home loan products in the market for you.

  • Find a legal representative (usually a solicitor or property conveyancer) to assist you with the property purchase. Ask if they are prepared to review a few Contracts of Sale (also known as Vendor’s Statement Section 32) before you secure a property.

  • Find suppliersto conduct the necessary inspections and searches, such as a pest and building inspection and/or a strata search.

Once you have found a property

  • Inspect it on a number of occasions and visit the street at different times of the day and week.

  • Ask the real estate agent for a Contract of Sale.

  • Forward the documents to your legal representative and ask them to advise you if there are any issues that you should be aware of. Potential issues could include an unusual title, detrimental planning permits, or owners’ corporation management concerns (for units and apartments). Some issues identified may need to be referred to your broker to ensure that your finance will not be affected; other issues are simply a matter for you to consider and decide if it affects your opinion of the property.

3 questions to consider

Is the asking price realistic?

Conduct your own research into recent property sales of similar types of property in the area. Don't just rely on the real estate agent's information as they may have only presented the favourable data. Your local Mortgage Choice broker will have a good idea of the area's property market conditions, and may be able to provide you with a property report that includes a price guide for the property you are considering, as well as recent sales of comparable properties in the area.

How eager is the vendor to sell?

Before making an offer, ask the agent if the vendor would prefer the settlement period to be long or short. This may give you an indication of the vendor’s eagerness to sell. For example, If they want only 30 days for settlement, it may mean that they are very keen to sell, so the vendor may accept a lower price if you can agree to this timing, because other purchasers may not. Alternatively, the vendor may want a long settlement. Note that settlement can occur on any agreed day. After the contract is signed, the date can be brought forward by agreement, but if you request an extension there is a risk of financial penalties to you.

Do you have too many conditions?

If you've included some special conditions in your offer, put yourself in the vendor's shoes, and consider whether you would accept an offer with all the conditions you’d like to include. Adding extra conditions may reduce the purchaser's risk, but the vendor and agent might see a greater risk of the sale falling through. This could have implications for the vendor and agent.

Marketing for the property will stop during the settlement period; however, it will have to be restarted if the agreement falls through. This uncertainty may reduce the chance of your offer being accepted and can be an important factor if you are making an offer prior to an auction when vendors may not accept many (if any) conditions.

Terms and conditions of your offer

The purchase price may not the only factor in your offer. Other considerations may include:

  • The length of the settlement period

  • Approval of your loan application

  • The findings of the building and pest inspection report or strata search (usually only conducted after an offer is accepted)

  • The amount of deposit you can afford - for example, you may only be able to pay 5% rather than the standard 10% deposit upon the exchange of contract

Here are some sample phrases you might wish to use when making the offer:

  • I want to make an offer of $X for the property.

  • My preference for settlement is 90 days.

  • My offer is subject to finance approval.

  • My offer is subject to a satisfactory building report to be arranged by me and completed within 48 hours of my offer being accepted.

  • I don’t have 10% cash available for a deposit so I can offer 5%.

  • My offer is subject to removal of the rusted car body in the front yard prior to settlement.

Remember, a purchase at auction cannot be made subject to conditions; however, you may discuss the settlement and the amount of any deposit with an agent prior to an auction.

Buying at auction?

A purchase at auction cannot be made subject to conditions, unless you have negotiated with the vendor beforehand and obtained written approval.

If you do wish to add some special conditions to your offer, below are some sample phrases you may with to use when approaching the real estate agent:

  • Will the vendor accept a 45 day settlement rather than the 60 days that has been advertised?

  • Will the vendor accept a 5% deposit rather than 10%, because this is the amount I have available?

  • Will the vendor accept a deposit bond, rather than a monetary deposit?
Posted in: Tips

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