What To Do Before Submitting An Offer - February 2023
February 23, 2023 / Written by Rich Harvey
The process for putting forward an offer on a property looks reasonably simply on the face of it. After some brief discussion with the agent, you come up with a price and get them to pull the contract together.
But this first offer is one of the most crucial moments in the timeline of securing a home.
Your offer becomes the kick off point for all the ensuing discussions and negotiations that ultimately determine the price and conditions under which you secure (or walk away from) the property. If you oversimplify the process and don’t give your offer the due consideration it deserves, you risk some dire outcomes.
To help, here’s my list of five things you must be across before putting forward any offer.
Know your values
I’ve used the plural on purpose because there are two figures you should have locked down before proceeding.
First up is market value. This is the price which, based on reliable comparable sales, the property should achieve on the open market. Determining market value accurately takes skill and experience, so don’t be afraid to ask for professional help with this.
The second is your “walk away” price. This is the highest amount you would pay for a particular property… not a dollar more.
While in most instances the two figures will be similar, there will be cases where they differ. For example, you may find a home that is ideal for your needs. While recent comparable sales suggest a market value of $1.2 million, you know demand is strong and listings are becoming rarer. You might be finance approved to $1.3 million and confident of capital growth in the near term.
Given all this, your walk away price could be $1.3 million if there are sufficient drivers of capital growth in place in that location.
By knowing both values, you can gauge which properties are worth stretching your finance a bit further for. This also defines price parameters, so you can form an opinion on what price to offer first up.
Due diligence on planning issues
Not enough buyers do proper due diligence on planning factors, but they should.
Make sure you do a town planning search so you know the zoning of the property and what the local authority will allow in terms of upgrades, construction or development.
You also need to know about overlays and restrictions. Is there a flood impact? Do heritage orders limit proposed works?
Also, understand what can be done on neighbouring properties. Perhaps they can be demolished and rebuilt, resulting in you losing your city view? Maybe they have commercial redevelopment potential?
A full due diligence on planning and overlays helps you make smart decisions.
Know your important dates
Take the time before putting forward an offer to know what dates are important to you in relation to finance approval, “subject to” conditions and taking possession of the home.
Talk to your mortgage broker about how long it will take for final loan approval to come through and make sure you allow for adequate time in your contract’s finance clause. The same applies to other clauses such as building and pest reports, or “subject to town planning advice” if applicable. There must be enough time to complete these.
Also, be aware of when you’ll need to move into the property. It’s no good offering the seller a long settlement if it means you will be left homeless for a couple of months!
Be aware of these dates and make sure the agent understands why it’s important that they’re included.
Understand the seller’s wants
In one of my previous blogs, I outlined a series of questions you should ask the selling agent. You want this insider info because knowing what the seller wants allows you to make an offer they’ll consider favourably.
If the seller wants a short settlement and limited conditions, then see if you can cater to that – but temper your price accordingly. If the seller needs to do a leaseback, consider if that is possible from your end. It could be the difference between you and someone else landing the property.
Know your negotiables
Once you have all the information, set out all your negotiables and non-negotiables, whether they’re around settlement periods, contract conditions, special clauses or price. Be aware exactly where your lines are drawn and be prepared to walk away from the deal if those “must haves” can’t be met.
Being well prepared to make an offer will help yield outstanding results. Of course, determining these factors takes effort and experience. If you want to ensure you offer is competitive, work with a buyer’s advocate. Their experience, connections and skills will help you land the best possible deal on the property you desire.
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