Is this ok for a written offer?

[Calico]

I am about to make my first written offer on a property can somebody tell me how the offer i have put together below stacks up?

The asking price is "offers above $335 000"

LETTER OF OFFER

From: XXX

To: Vendor of <address of property> C/O Vendor's agent, Southern Star Realty

Date:27th June 2009

RE: Property: XXX, NSW, Australia

I submit this formal offer to purchase your property on the following conditions:

Price: $328 000

Deposit payable: 0.25% of the purchase price payable when contract is signed.

Settlement: 42 days from date of contract

Contract will be signed within 5 working days of offer being accepted
-Subject to satisfactory strata report
-Subject to the contract of sale including a 10 day cooling off period.

Offer expires at 5pm on Monday 29th June 2009.

Please contact me on Ph xxx if you wish to proceed.


xxx

 

[Collector]

Your coming in a bit high - leaving little room for negotiation.

Why are you putting your offer in writing? and not verbal

If you really want the place get a copy of the contract - take it to your conveyancer to check over and fill in correctly at your price and your terms then present it to the agent - better chance.

1 other thing that the vendor may baulk at is the amount of deposit (0.25%) this may be OK to complete the exchange but I think you will need to account for the balance of either 5% or 10% prior to the cooling off expiring.

 

[Calico]

Thanks for those thoughts Collector.

Your coming in a bit high - leaving little room for negotiation.

You're probably right. We would be stoked to get the place for $330K and not too disappointed if we have to pay full price at $335K but don't want to go any higher. Perhaps I should make my initial offer $324K rather than $328K to leave a bit more room for negotiation.

Why are you putting your offer in writing? and not verbal

So the REA can't just shrug it off with a "they are only interested in offers over $335K as the ad says". I've read that if the offer is in writing then the REA is obligated by law to pass it on to the vendor and to inform me if a higher offer is made on the property.

If you really want the place get a copy of the contract - take it to your conveyancer to check over and fill in correctly at your price and your terms then present it to the agent - better chance.

If I do it that way then won't I have to pay my conveyancer extra to do this with no guarantee that my offer will be accepted?

1 other thing that the vendor may baulk at is the amount of deposit (0.25%) this may be OK to complete the exchange but I think you will need to account for the balance of either 5% or 10% prior to the cooling off expiring.

Yeah there is a 10% deposit payable at the end of the cooling off period specified in the contract of sale. I'm happy with that and don't want to change it so didn't see any point in mentioning it in my offer.

 

[twobobsworth]

Maybe it's just me but reading the offer tells me you've never bought a property before.

ie 0.25% on exchange..yes that's what the standard NSW contract says.
Settlement 42 days...maybe but what does the contract say? If it says this already it's a bit pointless. What if the contract says 30 days? So you need more time but don't want to pay top dollar?

The cooling off bit is also confusing. Are you saying if your strata report isn't satisfactory you also get your 0.25% back?? Why do you need a 10 day cooling off?

The negotiation of the property is a game. Who runs the game depends on your motives and the vendors motives. If it was me I would just be ringing the agent and say you're thinking of putting in an offer & whats the process? Doesn't mean you have to follow it but it gets the bait on the hook.

As for price you think they should be negotiable given the property was previously advertised as offers over $345K. But this is also FHB terroritory at the moment.

Good luck

 

[Rockstar]

Do you have finance? Otherwise S2F is necessary.
Subject to pest and building would be sensible.

Is it for an IP or PPOR?

 

[Calico]

Thanks for the advice - I have revised my offer accordingly

Is it for an IP or PPOR?

My first IP

As for price you think they should be negotiable given the property was previously advertised as offers over $345K.

I don't think the property has ever been advertised as $345K+ - at least it didn't show up on oldlistings.com.au

Why do you need a 10 day cooling off?

My mortgage broker told me that CBA are still very slow at the moment so even though I have pre-aproval it would be best to get the 10 day cooling off.

Maybe it's just me but reading the offer tells me you've never bought a property before.

Yes this is my first and I would prefer it if my offer did not sound so green so thanks for the feedback. Taking the advice I have recieved into consideration how does the revised offer below sound?

NB - I have taken out the 10 day cooling off period clause because I figure that I can bring it up once we have agreed on a price and are ready to sign.


LETTER OF OFFER

From: XXX

To: Vendor of <address of property> C/O Vendor's agent, Southern Star Realty

Date:27th June 2009

RE: Property: XXX, NSW, Australia

I submit this formal offer to purchase your property on the following conditions:

Price: $324 000 including GST

Subject to satisfactory strata report
Subject to satisfactory building and pest inspection

Offer expires at 5pm on Monday 29th June 2009.

Please contact me on Ph xxx if you wish to proceed.


xxx

 

[newlywed1311]

What about subject to finance?

 

[Calico]

What about subject to finance?

I have pre-aproval and I don't want to have to wait for the CBA to aprove my finance before I sign the contract. I'd rather sign the contract and take the property off the market then if for some reason my finance is knocked back I can rescind the contract before the cooling off period expires and I only forfeit 0.25% of the sale price.

 

[Perp]

I'd be inclined to add "subject to finance" and forget about the longer cooling off. Why do you want longer cooling off? That makes you sound very wishy-washy/uncertain. As a vendor, I'd be concerned that this wasn't a serious offer, just one of heaps that you're putting in, to see if anybody bites. (If you want to create this impression to drive price down, that's OK, but you run the risk of them passing.)

And 10 days isn't even enough for unconditional finance approval when lenders are working fast, let alone when they're working slow, in my experience. I know that RE agents will tell you it's possible, but ask a mortgage broker. I reckon even a very straightforward application will take 3 weeks to get unconditionally approved, and if you need other properties re-valued, need LMI, have non-PAYG income, get a bad valuation, or any other "complication", you could be looking at more like 4-6 weeks.

 

[Perp]

I have pre-aproval and I don't want to have to wait for the CBA to aprove my finance before I sign the contract. I'd rather sign the contract and take the property off the market then if for some reason my finance is knocked back I can rescind the contract before the cooling off period expires and I only forfeit 0.25% of the sale price.

OK, but I'd bet quite a lot that you won't have a final answer within the cooling off period. What's your plan if it gets to the 10 days (or whatever) and you still don't have their answer? Either way, you have to wait for CBA before going unconditional, it's just that "subject to finance" allows you to rescind without penalty, and a cooling off incurs a penalty and makes you look less serious.

 

[Collector]

In NSW we don't have subject to clauses in the contract or offer.


There are 2 ways to purchase a property:

1. Exchange though real estate agent - this will give you 5 working days cooling off = time to complete your DD and arrange finance - this period can be extended via negotiation.

2. Exchanging with your solicitor - no cooling off (normally) - this is normally done after you have completed DD and arranged finance.



If you exchange with the agent then rescind during the cooling off period you will forfeit 0.25% of the purchase price - regardless of the reason you rescind - the 0.25% is a penalty and is the cost of securing the property - risk over being gazumped.

 

[Calico]

In NSW we don't have subject to clauses in the contract or offer.

OK thanks Collector, I didn't know this so are you suggesting my offer should look like this:

LETTER OF OFFER

From: XXX

To: Vendor of <address of property> C/O Vendor's agent, Southern Star Realty

Date:27th June 2009

RE: Property: XXX, NSW, Australia

I submit this formal offer to purchase your property for the price of $324 000 including GST.

Offer expires at 5pm on Monday 29th June 2009.

Please contact me on Ph xxx if you wish to proceed.


xxx

 

[Rockstar]

Hi Calico,

Maybe best to just phone the agent and make your offer. I have never put in a written offer though I have told the agent my circumstances to pass on to the Vendor. ie: The contract will be Subject to finance, X% deposit, x days settlement, subject to pest and building. This is all pretty standard. The agent will pass this all on. Also tell them your finance is pre approved.

No need to make things complicated. And remember - there are plenty other properties out there just as good as this one. Proceed with diligence but don't get too attached to this deal.

 

[Perp]

In NSW we don't have subject to clauses in the contract or offer.

The contract will be Subject to finance, X% deposit, x days settlement, subject to pest and building. This is all pretty standard.

Hmmm... so do you have the ability to insert "subject to" clauses in NSW or not? Like Rockstar, I thought you could put them in, but ran the risk of being gazumped during the conditional period.

 

[Calico]

And 10 days isn't even enough for unconditional finance approval when lenders are working fast, let alone when they're working slow, in my experience. I know that RE agents will tell you it's possible, but ask a mortgage broker. I reckon even a very straightforward application will take 3 weeks to get unconditionally approved, and if you need other properties re-valued, need LMI, have non-PAYG income, get a bad valuation, or any other "complication", you could be looking at more like 4-6 weeks.

Ozperp, are you overlooking the fact that I already have pre-approval for the loan? The bank has already assessed my income and I don't need LMI because I am using a guarantor (who's property they have already valued). I can understand a new loan application taking 4-6 weeks to get unconditional approval, but going from pre-approval to unconditional approval only requires the bank to value the property I am intending to buy. I'm wondering if there is some difference between the way banks do finance in QLD and NSW which is why your advice seems odd to me?

 

[twobobsworth]

Hmmm... so do you have the ability to insert "subject to" clauses in NSW or not?

I've yet to hear of anyone being successful in getting it included, although i've tried.

 

[Perp]

Ozperp, are you overlooking the fact that I already have pre-approval for the loan?

No. It depends what you call a "pre-approval". Some people mean that the bank has already collected all the verifying documentation, ID, done credit checks, etc, and really only need the property valued. It sounds like you may be in this situation (given that the guarantor's property's already valued) and thus you may swing unconditional approval within 10 days.

I was influenced by the fact that most newbies, when they say "pre-approval", seem to mean that they've told the lender a list of their assets, liabilities, income and expenses, and have been told "yes in theory you can borrow that", based on a servicability calculator. This is really quite meaningless and leaves you still several weeks away from an unconditional approval.

Sorry if I misunderstood. It does sound like you're further down the track than that, great.

 

[Collector]

Hmmm... so do you have the ability to insert "subject to" clauses in NSW or not? Like Rockstar, I thought you could put them in, but ran the risk of being gazumped during the conditional period.

Your offer can be subject to anything including if you win lotto tonight..... but you can not add these to the contract.

In NSW when the contract is exchanged with the agent the only thing it is subject to is if the purchaser rescinds prior to the cooling off.


There are certain clauses that can be added to the contract but these are normally in regards to off the plan sales, registration of certain documents, completion etc - and have little bearing to the posters questions.


Like Rockstar said - call the agent and tell them what you are willing to pay - I personally would not concern myself with written offers.

The agent has an obligation to submit all offers received to the vendor unless the vendor has instructed the agent not to and in this case the agent must advise you that they wont be submitting the offer.


Best bet would be to make an appointment with the agent at his/her office, submit your offer and pay an "Expression Of Interest Deposit"



Law relating to deposits:


Principal to be informed of an offer

(1) The agent must, unless the principal has instructed to the contrary in writing, inform the principal of all offers of purchase as soon as practicable after receiving the offer up until exchange of contracts has taken place.
(2) If the agent is not going to inform the principal of an offer, the agent must inform the person who made the offer that the offer will not be submitted to the principal.
(3) The agent may inform the principal of an offer orally or in writing and must identify the party by whom the offer is made. If the principal is informed orally, the agent must confirm the information in writing.


Information to be given when expression of interest deposit paid

(1) When an agent issues a receipt for an expression of interest deposit made prior to exchange of contracts, the agent must inform the person who paid the deposit that the principal has no obligation to sell the property or the purchaser to buy the property and the deposit is refundable if a contract for the sale of the property is not entered into. The information must be provided in writing and may be provided on the receipt.
(2) The agent must promptly inform the principal when an expression of interest deposit has been paid.
(3) The agent must promptly inform the person who paid the deposit when the agent becomes aware of any subsequent offer to purchase the property received from any other person. The agent must also advise the person who paid the deposit that they have the right to make further offers up until exchange of contracts has taken place.


From: PROPERTY, STOCK AND BUSINESS AGENTS REGULATION 2003 schedule 2.

 

[Calico]

Thanks Collector that is crystal clear.

I'll be over in that part of town tomorrow so I will make the offer verbally after the inspection has finished and pay an expression of interest deposit then.

Will $200 be enough?

Will I get the expression of interest deposit back when I sign the contract or do I have to pay my 0.25% on top of it?

 

[Collector]

Thanks Collector that is crystal clear.

I'll be over in that part of town tomorrow so I will make the offer verbally after the inspection has finished and pay an expression of interest deposit then.

Will $200 be enough?

Will I get the expression of interest deposit back when I sign the contract or do I have to pay my 0.25% on top of it?

I would suggest $500-$1000

The expression of interest deposit is often called a holding deposit (but it does not hold or reserve the property) - this is fully refundable if you do not proceed with the purchase or will go towards the 0.25% or towards the 10% deposit depending on the process you end up taking