Need tips & ideas for making good below market value offers

[Mindmaster]

Finance paperwork is just about done, going over some decent properties and will be making some offers real soon. So what I'm sorting out is a good way to make offers below market value so they have a good chance of being accepted.

Been busy the last couple of hours using the search function and looking at threads going back to 2006 and these are the tips and ideas I've come across for making a low offer attractive.

-make the offer written not verbal
-put down a decent sized deposit ie 20% instead of 10%
-allow the deposit to be available to the vendor with minimal delay (not sure about this one)
-minimal conditions ie no more than B & P, try to get pre approval so subject to finance does not need to be a condition
-be flexible about settlement date ie be open to a longer date if that would suit vendor
-don't fart around and BS the REA. Make the offer, state you have cash and be clear that you will only be making one ofer
-know the market value and make an offer below value but not so low as to be insulting to the vendor and have no hope of being accepted.

If my tips/ideas are need correcting or if you have any tips/ideas of your own I'd be delighted to hear from you. I'm inexperienced and some what clueless so I'm trying to make my learning curve as painless as possible.

 

[matto_]

Hi Brendon,

Some great ideas. Seeing as you are in China, is doing this over the phone going to be positive or negative?

Thanks

 

[Peter_Tersteeg]

-make the offer written not verbal
-put down a decent sized deposit ie 20% instead of 10%
-allow the deposit to be available to the vendor with minimal delay (not sure about this one)
-minimal conditions ie no more than B & P, try to get pre approval so subject to finance does not need to be a condition
-be flexible about settlement date ie be open to a longer date if that would suit vendor
-don't fart around and BS the REA. Make the offer, state you have cash and be clear that you will only be making one ofer
-know the market value and make an offer below value but not so low as to be insulting to the vendor and have no hope of being accepted.

I don't know if it applies in every state, but I think some states aren't allowed to accept more than a 10% deposit.

Probably the best one here is making unconditional offers and being able to release the deposit quickly.

I know you've used a buyers agent in the past. REAs tend to take BAs offers seriously because they know they've pre-qualified the purchaser.

Try get the REA to work for you. Their main concern is getting paid which they can't do until they've got an unconditional contract. They also like the 10% deposit as it ensures they get paid (then the vendor gets the balance).

Purchasing from China means extra logistics with thinks like signatures and loan offer documents. It would be unwise to make offers with settlement periods less than 60 days.

 

[HotRod]

The two ways I purchase a property is either:

I accept the vendor's price with my conditions; or,
The vender accepts my price with their (or no) conditions.

People start to do strange things when they see a large deposit ($20 to 30K) about the same as the REA commission and the ability to access that money in a very short period (sometimes as low as 14 days). The REA will end up working for you, because he has his commission resting in his bank account and can get that a lot quicker than waiting around 8 weeks for a typical deal (4 weeks finance and then 4 weeks settlement).

They also can agree to conditions that they would not otherwise agree to if they get their asking price (and sometimes more).

 

[Ed Barton]

all of the above plus

- previous contract(s) have fallen over due to finance. it's important that they haven't fallen over because of low valuation but buyer servicing. make's potential purchasers and vendor think there's something wrong with the property when it's something wrong with the purchaser.

but in the end i think it largely comes down to pot luck. put enough low offers and you'll get one accepted.

 

[china]

other tip

Finance paperwork is just about done, going over some decent properties and will be making some offers real soon. So what I'm sorting out is a good way to make offers below market value so they have a good chance of being accepted.

Been busy the last couple of hours using the search function and looking at threads going back to 2006 and these are the tips and ideas I've come across for making a low offer attractive.

-make the offer written not verbal
-put down a decent sized deposit ie 20% instead of 10%
-allow the deposit to be available to the vendor with minimal delay (not sure about this one)
-minimal conditions ie no more than B & P, try to get pre approval so subject to finance does not need to be a condition
-be flexible about settlement date ie be open to a longer date if that would suit vendor
-don't fart around and BS the REA. Make the offer, state you have cash and be clear that you will only be making one ofer
-know the market value and make an offer below value but not so low as to be insulting to the vendor and have no hope of being accepted.

If my tips/ideas are need correcting or if you have any tips/ideas of your own I'd be delighted to hear from you. I'm inexperienced and some what clueless so I'm trying to make my learning curve as painless as possible.

I think it is also useful to provide written reasons as to why you are making your low offer. Reasons could be rental returns, recent sales, state of economy, lack of buyers, long time on the market, negative aspect of the building, smelly neighbour's dog, bad feng shui, etc.

 

[Mindmaster]

Thanks everyone for your great feedback

Hi Brendon,

Some great ideas. Seeing as you are in China, is doing this over the phone going to be positive or negative?

Thanks

I'll let you know when/if I make the offer. For now, I can see a few pros but more cons.

I don't know if it applies in every state, but I think some states aren't allowed to accept more than a 10% deposit.

Probably the best one here is making unconditional offers and being able to release the deposit quickly.

I know you've used a buyers agent in the past. REAs tend to take BAs offers seriously because they know they've pre-qualified the purchaser.

Try get the REA to work for you. Their main concern is getting paid which they can't do until they've got an unconditional contract. They also like the 10% deposit as it ensures they get paid (then the vendor gets the balance).

Purchasing from China means extra logistics with thinks like signatures and loan offer documents. It would be unwise to make offers with settlement periods less than 60 days.

Thanks Peter. A key point with the 60 day settlement period. Easy to get carried away and end up being unprepared for the logistics.

The two ways I purchase a property is either:

I accept the vendor's price with my conditions; or,
The vender accepts my price with their (or no) conditions.

People start to do strange things when they see a large deposit ($20 to 30K) about the same as the REA commission and the ability to access that money in a very short period (sometimes as low as 14 days). The REA will end up working for you, because he has his commission resting in his bank account and can get that a lot quicker than waiting around 8 weeks for a typical deal (4 weeks finance and then 4 weeks settlement).

They also can agree to conditions that they would not otherwise agree to if they get their asking price (and sometimes more).

Thanks Hotrod. You also emphasize getting the REA on yourside and suggest how to do that. Good to think of the REA and a potential ally and work the offer so they become one.

 

[Propertunity]

-make the offer written not verbal

Yes

-put down a decent sized deposit ie 20% instead of 10%

10% is all that the contract calls for. You can't do 20%.

-allow the deposit to be available to the vendor with minimal delay (not sure about this one)

This is not without risk. Even if it is only moving from one REAs Trust Account to another, for the purpose of the vendors buying their next house, if that deal goes bad, just try getting your deposit back.

-minimal conditions ie no more than B & P, try to get pre approval so subject to finance does not need to be a condition

Pre-approval only deals with you and your serviceability. It does not extend to the "subject property". The valuer may disagree with your purchase price.

-be flexible about settlement date ie be open to a longer date if that would suit vendor

...or shorter.

-don't fart around and BS the REA. Make the offer, state you have cash and be clear that you will only be making one offer

Mmmmm. Maybe. Are you going to walk away if they want $500 more only. Just be sure before issuing the threat - and be prepared to follow through on it (so they believe you next time).

-know the market value and make an offer below value but not so low as to be insulting to the vendor and have no hope of being accepted.

Yes, and also know the vendor's motivation for selling. No use making a below market offer to a non-motivated vendor who is prepared to wait years if necessary for the right price. Better to find a desperate seller.

Cheers Brendon.
Alan

 

[7smurfs]

regarding the "make the offer written not verbal" - does this apply for local buyers as well?

I am looking at making an offer on Saturday at inspection. Is it a better idea to simply email the REA afterwards with the offer rather than discuss it on the spot then and there?

Apologies, new to the scene!

Also, without hijacking this thread too much.... I was told by a REA that I cannot make offers to auction properties unless it is above the asking range. Is this true?

 

[Bird Dog]

Also, without hijacking this thread too much.... I was told by a REA that I cannot make offers to auction properties unless it is above the asking range. Is this true?

Err....Ummm... No! This is total BS!

You can make an offer whenever you want! Whether it's accepted or not is a different story!
I've been told that it's best to make an offer no less than three days prior to the auction to be on the safe side but if the vendors have had no interest in a property during their auction campaign, they'd be silly to reject offers no matter when it came in!

 

[7smurfs]

Err....Ummm... No! This is total BS!

You can make an offer whenever you want! Whether it's accepted or not is a different story!
I've been told that it's best to make an offer no less than three days prior to the auction to be on the safe side but if the vendors have had no interest in a property during their auction campaign, they'd be silly to reject offers no matter when it came in!

Thanks Big Dog, I will proceed with a written formal offer