December 12, 2021
When making an offer, it is important to remember that the real estate agent is working for the vendor to get them the best possible price. Confiding in them that this is your initial offer and you would increase your offer guarantees a vendor response asking you to raise your bid. Inevitably, despite the fact that a property may have been on the market for a very long time, just as you make your offer the real estate agent will be talking about an increased level of interest and the likelihood of other offers coming in or possibly already being made. This is all part of the game and the real estate agent’s attempts to create competition, a competition that you want to win!
I encourage my clients to turn the tables on both the vendor and the real estate agent by making their offer time bound, for example, this offer is valid to 4PM this afternoon. Write this on the contract when making the offer. The reason for making the offer time bound is because you have seen another property, or you are viewing another property and you would like to be in a position to make an offer on this other property if your current offer is declined. You have now turned the tables on the vendor and agent, as they are now competing for your business. In the current seller’s market this is a little less effective than it was in the past buyer’s market but it is still a powerful strategy that has helped my clients to purchase at prices below what they thought they would have to pay. It also leaves the door open for you to return with a higher offer as you find that the alternative property did not measure up in some way.
When it comes to signing the offer and acceptance, remember that the contract is written up by the real estate agent for the vendor. To ensure that your interests are fully covered, I would encourage you to identify a settlement agent or solicitor and prior to making an offer, I would suggest asking them for relevant annexures or addendums to the contract that you should include to protect your interests.
Finally, consider the settlement date you want. When I purchased my first home in Australia, I was a little naive and went with the real estate agent template of 28 days finance approval and settlement 28 days from finance approval. I thought 8 weeks to settlement would be fine and would fit in with my rental coming to an end. However, I already had pre-approval for finance and formal approval came through within a couple of days, so my settlement date was a couple of weeks sooner than I would have liked costing me both rent and a mortgage. Generally I would recommend 21 days for finance approval (28 days if your affairs are more complex) and then specify the settlement date as an actual date, i.e. Thursday the 29th of month. Key handover in WA is generally midday, the day following settlement unless the property is vacant or other arrangements agreed, so remember to factor this in too.
Remember, when all is said and done, it’s not all about the money. Making the wrong decision will cost you around 7 to 8% in costs. Selling and buying in the same price range will cost around 2.5% in agents fees and another 4 to 5% in transfer duty. Add to this the pain of moving and possibly paying a premium, as you will probably be buying on a subject to sale contract, and you can see the importance of getting it right first time. Paying a bit extra to secure a home that you will be happy in long term is better than buying the wrong house at a bargain price.