How to Make an Offer
Read on to learn all you need to know about how to make offer on your dream home.
You’ve found your home! What’s next? Making an offer.
You’ve found a property you like and decide to make an offer. Like most things in life, making an offer has become a little more complicated as there are now several ways that people offer their homes for sale. Each of these methods will require a different way of making an offer to complete your purchase.
The three most common methods a property is put up for sale are all detailed below. Click on any of these to go directly to more detail or continue reading for more information on each one so you are prepared no matter which method you encounter.
Private Treaty Sale
This is what you usually think of when people mention they are selling their house. The property is advertised for sale by the owner, usually through a real estate agent, and will include either a set sale price, price range, or commentary around the owner being willing to consider offers over a certain amount.
You can negotiate a price, terms and conditions, and go back and forward with the seller via the agent. Once price and terms are agreed, the agent will draw up a Contract of Sale detailing what has been agreed.
What happens next depends on how your offer is received by the property owner:
Acceptance: your offer is accepted by the seller. The seller will then countersign the contract and you will pay any initial deposit making the sale legally binding.
Negotiation: this will occur if the owner decides they’re no longer happy with your offer or wants to negotiate on either price or conditions. Often you will receive a counter offer from the seller, and it is then your decision to agree to their changes, negotiate further, or withdraw from the sale.
Rejection: occurs when the owner is not satisfied with your offer or you’re not happy with the counter offer.
Expression of Interest
Many sellers are now opting for an “Expression of Interest” type of sale. This is like a silent auction or bidding approach where the seller sets a date for all interested parties to submit their best offer as well as any terms and conditions they require. When the sale end date arrives, the seller and real estate agent together review each expression of interest to determine the winning bidder.
In an expression of interest sale, you will not know other people’s bids so you will have to put forward your best offer. After inspecting the property, doing your due diligence and as much research as you can, if you're still keen to buy it’s time to make your offer!
You will need to put forward your offer in writing to the real estate agent. Most times the real estate agent will have a prepared application form or online tool for you to fill in and this will usually have space for you to capture the details of your offer including price and any terms you require.
Terms and Conditions of Offer
As you have seen, in these first two methods of making an offer you must include both the price you’re willing to pay as well as your terms required for the sale to proceed. These terms of offer, sometime known as conditions, are important to understand. They are used to help you protect yourself from becoming legally responsible for a property you cannot afford, find to be unsafe in any way, or has unseen damage needing major repairs you weren’t aware of.
So, when you make an offer on a home via private treaty sale or expression of interest, this is what is known as a conditional offer. If you make an unconditional offer, this can be high risk and is the same as making an offer at Auction.
It is up to you to decide what your terms and conditions will include. Here is a list of the most common and our recommendations on each to consider:
The price you want to offer
You will need to come to a figure that you are comfortable with, can afford to pay, and is hopefully equal or less than your pre-approval!
How much you will pay as your deposit
Your deposit is most commonly paid in two parts.
Initial or Holding Deposit: This is usually a small amount, $500 to $2,000, or up to 0.25% of the purchase price, as a good guide. This is paid directly to the seller's real estate agent into their trust account and is usually due within a day or two of the contract/offer date.
Balance Deposit: This is usually 5-10% of the property price. Setting your deposit amount at the higher end may be more attractive to the seller, so this is for you to decide based on your personal situation and finances. This is not due until your conditions are met, i.e., you’re happy with the building and pest inspection report and have received unconditional approval from the lender for your finance. Again, this amount is paid directly into the real estate agent's trust account.
When paying your deposits, make sure to request the trust receipts as proof of payment which you will need to provide to your broker or lender.
The deposit amounts paid are included in your overall contribution towards the purchase – not in addition. If you are for example contributing $70,000 and pay $20,000 in your combined deposits, then you will have $50,000 less to contribute.
Finance Date: The standard is to include a 14 to 21 day finance clause from the contract date to allow time to obtain unconditional approval of your finance.
Building and Pest Inspection: Most people align this to match their finance clause, so again including 14 days from the date of contract is our recommendation to allow sufficient time to arrange this inspection, receive the report, and to assist with any negotiations resulting from any damage found.
Settlement Date: This one is more flexible and up to you to decide. The standard is usually 30 days; however, you may want slightly longer to align better with exiting your current rental arrangement or to better suit another life situation. Or perhaps the seller would like a longer time to move out. Anywhere between 30 to 90 days would not be uncommon. Good communication between you and the seller can help here to make you offer as attractive as possible.
Contact details of your conveyancer
Including the contact details of your conveyancer is important as they will get a copy of the contract and will assist you to complete the legal transfer of the property into your name.
Strata checks: If buying into a strata property you should talk with your conveyancer about obtaining a strata report and running any necessary legal searches to ensure all is in order.
Any other conditions deemed necessary. One example might be additional checks on current property works or ongoing repairs to confirm their completion is satisfactory.
Auction
An Auction is a public sale where all potential buyers come together at the same time to submit their bids to buy a property, which is then sold to the highest bidder. If you are the winning bidder this is an unconditional sale, which means that you are legally required to settle the contract no matter your circumstances. So yes, Auctions are a higher risks method of buying a home.
While being higher risk, this doesn’t mean there isn’t a place for buying at auction. We work with many clients who have prepared and done their research, completed their inspections and checks, are well informed and most importantly have worked with us to obtain their pre-approved finance to be able to confidently attend and bid at auction knowing they have the finance available to settle the purchase contract.
Assuming you are one of those well-prepared buyers, how do you actually make your offer at an auction? There are few requirements and processes to follow to do this:
In some states, such as QLD, you need be a registered bidder first. It’s a simple matter of providing the selling agent a copy of your driver’s license 10-15 prior to the scheduled auction time. In other states like Victoria and Western Australia there is no requirement to make yourself known ahead of making your ‘bid’.
You will receive a paddle with a unique bidding number. This is what you use to indicate you’d like to make an offer at a certain price by holding up your paddle in the air as the auction takes place.
If the property meets the reserve price, and you are the highest bidder at the fall of the auctioneer’s hammer, then you have now bought a property!
Final thoughts
You now should have a pretty good understanding of the most common methods that properties are put forward for sale and how to make your offer at each of these. You should also have a clearer idea of exactly what you should include in your offer and if this is a conditional or unconditional sale.
Buying your home or investment property can be a fun and exhilarating process, knowing exactly what you’re in for and avoiding any surprises can help ensure it stays that way! As always, if you have any questions or want to discuss your own finances ahead of making an offer, we are always happy to have a chat so please do give any one of us here at I Know The Broker a call 😊.
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