What should you know before making an offer to purchase a property in Victoria?

You’ve found the right place so you want to put in an offer to purchase but you don’t know what to do. Here’s a list of things to think about:

 

I've put this together as a guide to try and help you through the process of putting an offer in to purchase a property. Unfortunately real estate agents don't help you with this (yes, I'm generalising) because they're just interested in making a sale. Rule number 1, the real estate agent is working for the vendor and not for you.

 

You go back to the real estate agent’s office and they ask you to put your offer in writing. The document put in front of you says ‘Contract of Sale’ at the top but you thought you were just making an offer and not entering into a contract just yet. The term ‘contract of sale’ scares you a bit – you want to buy this place but there are too many legal forms and terms that are confusing you!

 

Your offer to purchase is made on the document titled 'Contract of Sale' - you sign the document but it is not a binding contract because the vendor has not signed it. The real estate agent will then take this document to the vendor and if your price is acceptable, they will sign it and it now becomes the Contract of Sale.

 

Make sure you do not sign the contract of sale document until all the conditions you require are listed on your offer.

 

When you make your written offer, the real estate agent will normally ask for a $1,000 deposit. This is a sign of good faith that your offer is genuine, that you are not going round to many different properties putting in offers and hope that one gets accepted and also covers the cost if you decide to withdraw your offer during the cooling off period.

 

There is nothing here in Victoria that states your deposit must be 10% of the purchase price but it has become accepted as the ‘normal’ deposit. If you’re not prepared to pay 10% deposit, or if you don’t have the money available to pay this much, don’t sign the document to say that you can! We recommend offering the deposit that you are prepared and are able to pay and making sure the date it is due is the same date as the finance clause on your offer (assuming your offer is subject to finance).

 

If you do not have the full deposit the real estate agent is asking for, offer alternatives like a reduced amount or the use of a deposit bond/guarantee (we can provide details if required). Each are legitimate ways of paying the deposit but it needs to be acceptable to the vendor and the real estate agent but please don't sign your offer document unless you can proceed with what is on the Contract of Sale.

 

If you want to make sure your offer subject to building and/or pest inspection, the real estate agent will usually have standard wording to be included on the contract. Check the wording they provide and, if acceptable, proceed. If the wording is not acceptable, ask for it to be altered to your requirements. (remember the real estate agent is working for the vendor so any wording they provide is probably in the vendor’s favour, not yours)

 

Chattels. This lists out what is included in the property you are purchasing so make sure any ‘removable’ items are listed. For example – cubby house, dishwasher, curtains, floor coverings, etc

 

Subject to finance. The real estate agent will try to talk you out of having a finance clause (because there’s always someone else interested in the property and they’re going to make an unconditional offer). Ask for two weeks (10 working days) and be specific on the lender you intend using and the amount of the loan. If they real estate hasn’t had any luck talking you out of making your offer ‘subject to finance’ they will now have a go at reducing the time required. Lenders need 2 weeks to process your application so stick to the 2 week request.

 

Settlement Date. 30, 60 & 90 day settlement periods are normal but, once again, ensure the date is acceptable to you before you sign the offer document.

 

If you're first offer is not accepted, the real estate agent may come back to you for a second offer. This may mean you need to offer an alternative price (normally higher than your first offer!) so if you make another offer, make sure all the dates are still OK (completion of inspections, finance clause, payment of deposit, settlement date, etc) - check these again before signing/initialling the new offer.

 

So you’ve made your offer and paid $1,000. You've made your offer subject to finance, with a 2 weeks finance clause, and the balance of your deposit is due the same date as (hopefully) you get finance approval from your lender and phoned Mortgage Choice to get your loan application underway. Simple, isn't it!

 

Have you realised it’s a good idea to have a good broker working for you? For more information, contact Peter Ruddock on (03) 9877 6471 or peter.ruddock@mortgagechoice.com.au

Posted in: Tips

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