So, you have been looking at lots of property, spending time online and going to open homes, all in the search of your dream home. Finally, you find a property that you think ticks all the boxes and you want to make an offer but you are unsure how to proceed. I have written this blog to help first time buyers navigate the process of making an offer and negotiating.
When it comes to buying property, you must do your research on price so that when you find a home you like you have a fair understanding of its value. Unlike the share market where the current market price of each stock is displayed on a screen for all to see, the value in the housing market is determined by the buyer and the seller agreeing on a price.
As a buyer you do have the option to get an independent valuation done on the property before you make an offer. An independent valuer will conduct a thorough assessment of the property and provide an extensive report outlining how they determined the value of the home. The valuer will take into consideration a number of things, however mainly they will be looking at the size of the land, the size of the home, the quality of the build and the overall condition of the property and the yard. They will also take into consideration market activity and make genuine comparisons with recent sales. It is important to remember that a valuation is merely one person’s opinion and is not a definite indication on what a property will sell for.
As an agent when I value a client’s property I need to be looking at what is a premium outcome for my client and I need to determine whether the home has the potential to create emotion and competition with buyers because it is these two factors that drive prices up and ultimately as an agent that is what we are paid to do for our client. So as a buyer understanding that the agents job is to create an emotional connection and to create a competitive environment will help you to navigate the buying process. When it comes to selling a home for a premium price, it is competition between emotionally charged buyers during negotiations that puts the control in the hands of the seller. A great example of this is an auction where there are two or more buyers that are totally in love with a property bidding against each other to win.
When it comes to buying I recommend that when you find a property you want to purchase, move quickly to get the property under contract, the longer you take to negotiate the more you leave the door open for the agent to find another buyer and place you into competition through a multiple offer situation. Legislation in Queensland requires agents to present all offer to sellers regardless if another offer is currently being negotiated, so quite simply the property is always available to purchase until a fully executed and agreed contract has been signed and dated by both a buyer and the seller. Making an offer does not grant exclusivity over negotiations, so it is important to move quickly once you decide to purchase a home that you like.
When it comes to real estate every buyer wants to pay as little as possible and every seller wants a premium and it is somewhere in between that becomes the market price. The market price will be determined by which side of the negotiations has control. When the buyer has control the buyer will have the ability to drive the price in their favour and when a seller has control they will have the ability to negotiate the price higher.
It is very important to understand that the selling agent is working for the seller and should be doing everything possible to push the price as high as possible. When it comes to making an offer the agent should be asking lots of questions to determine how much you like the property and how much you have to spend. Once a good agent finds out your budget they will be doing everything possible to ensure they get your best possible offer.
My advice to buyers is once they like a property and decide to make an offer be upfront with the agent and let them know that you are interested and that you would like to make an offer and try to purchase the home. In my experience as an agent the easiest way to negotiate is to be open and honest about your intentions so that there are no surprises. Negotiations are difficult to control without getting a little frustrated because ultimately both parties are aiming for different outcomes and due to this it is very easy to get upset and frustrated if negotiations are not going your way. It is best to stay composed and remain polite and see the process through to finalisation, vary rarely does quality property sell for a bargain so it is unreasonable to expect to secure a quality property below value in a reasonable market regardless of competition. Be prepared to pay a fair price for fair property and a premium for premium property ultimately you will be afforded the same luxury when it comes time to sell in the future.
It is best to ensure that you make your offer in writing by filling out and signing a contract to purchase, this will show the seller that you are serious and that you are prepared to make a commitment. Verbal offers hold little substance and are unlikely to be taken with the same seriousness as a written offer.
It is best to try and keep conditions like building and pest and finance to the shortest timeframe possible as this will show the seller that you are serious. As an agent I am always reluctant to advise my clients to sign a contract that ties their home up with conditions that span more than 14 days. Whilst a property is under contract the seller is in limbo until the conditions are met. Ultimately the seller and the agent will be looking for a clean contract without conditions so it is important that if you require conditions to make sure they are as favourable as possible to the owner whilst still allowing your needs to be met.
Once you make an offer, one of three things will happen.
Quite simply negotiating is a process where you start with what you want and work towards what you will accept depending on the agent’s ability to convince both parties to become flexible. However you must be aware that a good agent will be working to ensure that it is the buyer who has to move the most.
Buying property is one of the most satisfying and rewarding processes and with the right guidance and help you will easily become confident and knowledgeable about the process. If you are unsure and require advice during negotiations seek out a good agent that is not party to the sale and ask them for some advice most well respected agents will happily free of charge point you in the right direction.
Early on in my career I met with a client who had a portfolio of 77 properties. I asked them what advice they could give to me that would help me grow a property portfolio, they said that I it was important to seek out a trusted network of advisers that included a finance broker, a solicitor, a real estate agent and an accountant. If you have good advisors in all of these areas you cannot go wrong.
Like all industries there are good and bad operators so when you find a good real estate agent stick with them and build a relationship where you feel comfortable to trust their advice. As an agent I do not charge a fee to help my clients when it comes to buying as a result I have a number of clients from all walks of life who regularly ask for advice on properties that they are looking to purchase. As an agent I happily provide them with the information that they require free of charge because I know that when the time comes to sell they will hopefully engage my services.
Hopefully this blog has given you a basic understanding of how to make an offer should you require more information regarding property feel free to contact myself or any of my team at Harcourts Caloundra