how to make an offer? HELP please...

[suffragette]

hi everyone
i'm planning to make an offer soon on a ppor.
i'm abit confused with how it all works.

with the FHOG, we'll have just enough for a 20% deposit and closing costs. when i submit the offer, do i offer $500/1000 , then pay the 20% deposit within 1-2 weeks? i'm not sure when do we receive the FHOG, is it after settlement?

or, do we offer 10% in 1-2 weeks, then another 10% on settlement with the mortgage? how is it normally done?

thanks in advance everyone for your advise....

 

[TheCamel]

you can get a thing called a deposit bond...

 

[Twitch]

Hi, I don't know how the FHOG works but here's the buying process without it.

You need to put up a (usually) 10% deposit on contract exchange. Then at settlement your lender will put up 80,90,95% or whatever you've arranged, and you put up the rest incl. stamp, and other closing costs. You usually have the option to pay the solicitor at this time or do so separately.

Deposit bonds are only accepted in certain niche markets (low demand markets?), eg, some OTP sales. Many REAs will not touch them. At least that was the case for Melbourne market.

Good luck.

 

[GinB]

My sister just recently purchased her first home, it was a brand new apartment in Preston not off the plan. When her offer was accepted she used a deposit bond for a deposit which she bought a couple months ago when she started looking around for places. You pay i think around $300 for the deposit bond & it usually lasts for 6 months. Her broker organised the deposit bond together with her FHOG & the loan. When her offer was accepted everything just fell into place for her, her borrowings were 97% with LMI capitlised, & all she had to fork out was a few thousand dollars from memory. Hope that helps.

Rgds,
Gina.

 

[suffragette]

hmm... never heard of a deposit bond before, am trying to find out more about it. so you apply for it with this company called DBA? so even if i got a deposit bond, i still have to pay the deposit within 6 months when it expires rite? am i understanding it right?

i am in melbourne, so if Twitch is right, i dont think i'll do that. it's definitely not a low demand market where i'm trying to purchase, had 3 houses that i was interested in sold already even before i can organise an inspection.

i will check with my broker if he can organise FHOG for me.

 

[Twitch]

hmm... never heard of a deposit bond before, am trying to find out more about it. so you apply for it with this company called DBA? so even if i got a deposit bond, i still have to pay the deposit within 6 months when it expires rite? am i understanding it right?

i am in melbourne, so if Twitch is right, i dont think i'll do that. it's definitely not a low demand market where i'm trying to purchase, had 3 houses that i was interested in sold already even before i can organise an inspection.

i will check with my broker if he can organise FHOG for me.

Suffragette, don't take my word for it, simple solution is to ask the listing REA, in the end it's them that will determine if a deposit bond is OK.

 

[suffragette]

thanks twitch, i will check this with the rea when i meet him.

 

[GinB]

No when a deposit bond expires it means that you will have to apply or submit another one & pay another $300 for it if you have not purchased a property within the 6 month time frame that it allows you to use it. It replaces you physcally putting up the money from your own pocket when a deposit is required to secure a property. So if you dont use the deposit bond at all because you have not purchased any property within 6 months, all you lose is the $300. Anyway that is how it worked out for my sister who recently purchased her first property in Preston. BTW deposit bonds are used in the Melbourne market as i know that quite a few people have used them even investors i know i used one about 5 years ago which i think my REA organised it for us. Anyway if you just want to make sure it would be probably a good idea just to check with your REA that they do accept deposit bonds. Your broker should be able to organise this for you if you are interested together with your FHOG & finance. Deposit bonds can be done within a couple of days its a relatively simply procedure.

Rgds,
Gina.

 

[Firsthomelooker]

Maybe things are different in Melbourne than ACT/NSW but I have never had a vendor (and it is the vendor, not the agent who decides what deposit is acceptable) refuse a deposit bond or 5% deposit.

Basic timeline:
1. Find property, make offer, pay $500/$1000 good will deposit if you want. Despite often being called a 'holding' deposit it doesn't secure you the property.
2. Exchange contracts (can be done by the agent, solicitors or at auction) and pay deposit usually 10%, 5% or deposit bond
3. Settle on sale - balance of purchase price paid, FHOG is not paid to you until settlement so don't count on using that for a deposit

A note re deposit bonds - there are heaps of different companies offering them so you might like to shop around. It is essentially insurance for the vendor if you default the deposit bond provider will pay the vendor the 10% upfront then chase you for the money, saving the vendor the costs and risk involved in chasing you.

If you only pay 5% at exchange you are still liable for 10% if you default.

 

[suffragette]

thanks alot firsthomelooker!
that timeline really explains it!

if we already have the 20% deposit, is a deposit bond still recommended? that means spending $300 on top of our 20% deposit.... is this a silly question?

 

[jasperjue]

Wow - i've bought 10 properties over a few years and the largest deposit i have made before settlement is $1000.

 

[mystery]

Firsthomelooker,

You are right about needing a deposit bond when exchanging contracts in ACT/NSW, but other states have a different system. You can use a small deposit at the time of signing the purchase contract say $1000 and the balance paid at settlement.

ACT/NSW system is not my preferred method of purchasing as it allows for gazumping to go on until the contracts are exchanged. I am in the middle of purchasing a property in NSW at the moment and should have exchanged last Thursday, but the vendors solicitor has misplaced or lost the contract ..... signing a new one today with deposit bond ..... a real pain as until we exchange contracts the property is still on the market.

I can understand now why they have so many auctions in Sydney in a rising market ... no one would get to exchange contracts because of gazumping.

Martin