A few simple tips

[JamesGG]

Hiya,

Dale asked me recently to write a breif article outlining a few tips and hints about the offer process when buying property. This is aimed primarily at our clients who have had little dealing in this arena as yet, and it is based on the laws in Victoria (so may be a little less applicable in other states).

I realise that many people here will skim through the page and quickly discover that I have written nothing that they did not know already. That is fine.

With any luck, there may be a less experienced investor than you who may be able to save themselves a little money and be able to secure the deal.

This will be available on our website sooner or later, but, again, I wanted to share it with the community that has given me so much valuable information over the last three years or so.

Any and all feedback is more than welcome.

Regards

James.

 

[grubar30]

good read - I learnt a lot, esp. about the first initial deposit, which every agent seems to say you need to do....next time I'm saying ZERO!

George

 

[JamesGG]

Hiya,

I probably should have mentioned, that another option is to write (for example), $500 upon acceptance.

This then saves you waiting for cheques to clear and lazy agents, if the offer does not happen the way that you wanted it to. This is a good way to go if the vendor (and thus the agent) is insistent on some sort of initial deposit.

Thanks for the feedback, too

Cheers

James.

 

[redwing]

never done Zero Grubar..but I've done $100 as my lowest

 

[Bantam Roosta]

$0 down

I paid $0 down for my first property. I asked the agent if they wanted some money down and they said 'no, don't worry about it, it's not legally binding anyway', or words to that effect.

BR

 

[Jacque]

Good on you James for sharing your insider knowledge
Very useful tips there, especially for virgin investors.
I second your opinion on amending the building and pest clause, "to the purchaser's satisfaction", and would also suggest adding this to the finance clause as well. This is so that the vendor can't then turn around and offer you his/her own vendor finance to get the deal over the line.
Don't think it doesn't happen to buyers- I've heard of a few cases where buyers have been caught out by this very situation.

 

[Sultan of Swing]

There are some good tips there, James.

Depending on the circumstances, I'd advise people to make lowball offers. That seems an obvious thing to say but some buyers think that getting 1 - 2 % off the asking price is a good deal. There are times when you may get the property a lot cheaper than that.

In a slow market, I'd ask an agent if an offer equal to 20% below the asking price would be acceptable. The worst they can say is 'no'. Remember, a good agent won't tell you that you can get it cheaper but may say, that's a bit low but why don't we try this figure.

eg A house is listed at $200,000. It may only be worth $180,000. The agent can't ethically say, 'Offer them $180,000'. However, if you say to the agent, 'Offer them $160,000' the agent can say, 'That's a bit low, why don't you try $170,000 and see how you go'. That way the agent has fulfilled his obligations in working for the vendor and getting the price up. Then it's up to the owner to say 'no' and after negotiating, you may get it for $180,000.

Sometimes a low offer is just what an agent needs. Take a situation where the agent has an overpriced property on the market. He's explained to the owner it’s overpriced. A low offer may be just what the agent wants to help the seller to see sense and be realistic.

As James said, it may have been on the market for a while and you may be the first person to show any interest. I've seen what seemed to be ridiculous offers accepted and thought to myself, 'Wow, I wish I had bought it at that price'. Even as salespeople, we don't always know just how motivated or desperate a seller is. Money isn't always the issue.

Be careful what you say in front of an agent too. As a salesman, I’m always trying to get the best possible price for the vendor, as that’s what they’re paying me for. There’s a line I use to see if the buyer will come up with their offer. In the above scenario, if the buyer offers, say, $170,000, I’ll say, “Hmmm, that’s a bit low, but it’s a good place to start, isn’t it?’ 90% of the time the buyer will say, ‘Yep’ or ‘Yep, we have to start somewhere’. What do you think that tells me? They’re prepared to increase their offer!

The other mistake some buyers make is telling me what they’ll go to. They make the offer of $170,000 and tell me they’re prepared to go to $180,000. What do you think I’m going to tell the vendor? Of course, I’m going to tell him that we have an offer of $170,000 but the buyer indicated he’d go to at least $180,000, maybe more with a squeeze.

Regarding deposits, it isn’t a legal requirement in Tasmania to have one either and I’ve sold plenty of properties without one. However, some sellers want one right or wrong and by offering a substantial deposit, especially if you’re making a lowball offer or you really want the property, pay it. If there’s a cheque for 10% of the offer with the contract, it may just help get your offer accepted.

Most of the contracts in our office state that the deposit is to be paid within 7 days of both parties signing. That can save messing around and refunding cheques. As covered in a recent thread, an agent is required to receipt and bank any deposit cheque that day or the next business day if received on a weekend.

James’ tip to pay your deposit on acceptance of your offer is a good one, depending on the situation.

My 2 cents.

Cheers

 

[vandalic]

Some very useful advice for a first time buyer like me, thanks heaps guys

 

[scouse]

offers

over the past 2 wks made 3 offers; written and not subject to finance, 10%less than advertised value.
In each case agents not keen to negotiate.
We keep trying, now have to wait till after christmas for more offers as we're off on hols.

 

[TomL]

Make offers while on Holidays

Have a good one!

 

[BillC]

I am selling a property at the moment and an offer came in today 20k below what I wanted and the agent left it up to me
The usual comes up from the Agent its Christmas and nothing will happen until the end of january etc etc
The property is in a prime location in Melbourne and am selling it at a fair price
I am a motivated seller but dont like being insulted either
Just thought I would put a sellers view across

Remember when we buy property sometimes we sell as well

 

[Sultan of Swing]

The usual comes up from the Agent its Christmas and nothing will happen until the end of january etc etc

I disagree totally with the 'nothing happens in January' line.

We often have quiet and busy weeks as any business does but if I look back at 13 years in the RE industry, the only 3 weeks that are consistently quiet are the last 3 weeks of December. January is historically one of our better months.

The agent rightly said it's up to you but don't fall for manipulative lines.

Cheers

 

[geoffw]

Now on the web site- http://www.gatherumgoss.com/property_tips.htm

It's probably too late now- but my tip would be to check out auctions just before Christmas. I'd been interested in a property a few years ago, but decided that at the indicated (fair) price I wouldn't be interested- but I went along to the auction anyway.

The auction was on Christmas Eve- and the property was sold at 20% below the indicated price. There were not enough interested buyers on that day to give support.

I missed out on a bargain. And that was before the boom.

 

[Jen]

Thanks for the tips James, they are interesting to read.
A few years ago I went to a Dolf de Roos seminar and he was instrumental in giving me the courage & a few handy tips to start in the property market. One of the things he advised was to give a low offer (in most occasions) but to place a sizeable deposit down as that showed that you were serious and the offer would be more attractive to a vendor, especially if they were motivated, meaning that they may be more likely to accept your offer. I started doing that but don't anymore - no real reason why I stopped. Perhaps not experienced enough to judge its value either way.
Dolf de Roos is obviously very experienced & it is a successful strategy for him but I find it interesting to see different people's ideas and read what works for them.
I wonder how much the issue of a deposit and how much the deposit is, has a bearing on the vendor's response to an offer.

 

[kathryn d]

When we make offers and one of the conditions is being able to secure finance,it is common to state a certain percentage that it is capped at. For example, we won't pay more than 7%. Is that common in Aus as well?

 

[kathryn d]

I am selling a property at the moment and an offer came in today 20k below what I wanted and the agent left it up to me
The usual comes up from the Agent its Christmas and nothing will happen until the end of january etc etc
The property is in a prime location in Melbourne and am selling it at a fair price
I am a motivated seller but dont like being insulted either
Just thought I would put a sellers view across

Remember when we buy property sometimes we sell as well

Why would you be insulted by a low offer? If you own IPs then you should know it is all a numbers game. Treat it as such. Counter- offer.

 

[skater]

Why would you be insulted by a low offer? If you own IPs then you should know it is all a numbers game. Treat it as such. Counter- offer.

Got to say, I agree with this. We often offer more than 20k below asking price.

 

[Fish]

Hi

I recently made a $25K below-asking offer on a property in order to kick-start the negotiation process ( which I expected to happen ). I was a bit surprised to find that the agent wasn't happy to see me, and didn't take this as a foot-in-the-door to kickstarting a negotiation process and a sale. Instead, I received a 'sorry, not interested' reply.

I think that it's like entering an opening bid at auction. You only want to put over the minimum bid to get the process moving. Why would you offer more than the vendor might secretly be happy with? We do it at auction, why not for every purchase....property or otherwise? From memory, every advertised price, property, groceries, whitegoods...is simply an 'offer' to you. There's no obligation to accept those terms, so why not counter-offer?

My two-bob.
Fish

 

[Bargain Hunter]

Hi Fish,

Gotta agree. We frequently offer below asking price however, we have sometimes 'insulted' people and the 'negotiation' has come to a grinding halt.

Oh well, a bargain comes along at least once a week....

You might want to catch up with the agent after a few weeks and see how insulted the vendor is then.

Regards

Andrew

 

[crest133]

The shoe spends time on different feet.
There are many times when the REA starts the problem with buying the listing" , inflating the appraisal, creating false hopes for the vendor to gain the listing. Then along comes the conservative offer which seems even lower due to the REA's initial price inflation. Some of the RE "ethics rescuers" antics here are legendary, "conditioning" the vendor into accepting a lower asking price every 10 days according to the manual, because that's the minimum time required to digest the last dose of disappointment.
So if you get the "I'm insulted" treatment from the vendor or agent, that's a sure sign of an inexperienced seller. An experienced one would use the opportunity to start a negotiation process. Not sure in all cases whether I'd prefer an experienced seller or not.

Anyway, the negotiation process has been around a long time, it predates REA's, and probably hasn't changed much since humans first started bartering.

Wish I was better at it, not my strong point ( yet ).

Happy negotiating.

cheers
crest133