Even a 1 or 2% discount on a property can save you thousands of dollars. Negotiating isn’t a skill that comes easy and most buyers have no idea what tactics to implement or what they can negotiate on. Luckily for you, over the last 12 months alone I sold around 50 properties so I have a considerable amount of negotiating experience. Below are some tips for buying a property you should find helpful.
THE NUMBER 1 MUST IMPORTANT THING EVERY BUYER NEEDS TO DO IS GET YOUR FINANCE APPROVED
Many buyers don’t know exactly what this means. Many think they have a pre approval but don’t. As a buyer this is the single most important thing you need to do. Before you start the search get yourself pre-approved with your finance. This will make you look desirable to sellers and give you more power during negotiations. Becoming pre-approved lets sellers know you have the cash to backup your actions.
It’s far too common for buyers to tell a sales agent they have finance approved or the finance broker said “finance would not be a problem”, then they make an offer and are surprised when in fact they can’t get finance and it’s declined.
But it’s not the buyers fault. Many finance brokers aren’t keen to go through a full pre-approval process because it’s the work of a full loan application that they don’t get paid for unless you buy within 12 weeks. So instead many finance brokers prefer to just look at your “situation” and assume you’d get finance or not based on what you’ve told them. This is a huge trap, because when you do apply for the loan, the lending provider will want to see all your bank statements for the last few months, your pay slips, tax returns, credit cards and they will go through all this in very fine detail. You may even be decline if you paid a bill late from several years ago. The lending provider reviews all this much much closer than a mortgage broker would.
Buyers are often shocked what the banks are now asking for and it can take some buyers over a week to find and get all that information to the finance broker or bank. At the time of writing many banks are taking over 2 weeks just until they pick up an applications file to look at it. Then if information is missing it can be an other week until they look at it again.
So the number one best advice I can give a buyer is please, deal with a finance broker that is happy to go through the detailed pre-approval process with a finance institution. This is the only way for you to be 100% certain you’ve got access to funds and exactly what your limit is.
Julie McKewin is based on the Sunshine Coast Qld and is a particular good broker, who is more than happy to go through a pre-approval process. Julie can be contacted on her LinkedIn profile here.
MAKE YOUR OFFER “ON PAPER”
Be really concerned if a sales agent is happy to take your offer “verbally” it’s a sign of a lazy agent, an agent that’s not taking you too seriously & it’s way too easy for the seller to simply say “No”.
Instead, insist your offer is written up on the official paperwork, being a sales contract. If the sales agent isn’t prepare to do this you should insist on it. It’s another sign that you are serious. Verbal offers and letters of offers are really a bit of a joke in my opinion.
When you sign your offer on the official paperwork, you are signing a sales contract. Which you can read more about here on the qld department of fair trading website. The sales contract states that you should seek legal advice. But keep in mind. You are protect by 5 days cooling off. You are protect by whatever other conditions you want to add, like a finance clause. So you should be OK to sign knowing this. You can read more about the 5 day cooling off on the qld department of fair trading website here.
I walk my buyers through the sales contract and its very rare they feel the need to slow things down by getting legal advice. But if you feel unsure at any stage, ask them yes you should definitely show it to your solicitor first. It’s important your solicitor is based on Qld and ideally based on the Sunshine Coast Qld. Two that we deal a lot with and find good are My Legal in Maroochydore & By The Rules.
HAVE A BIG DEPOSIT
Occasionally buyers would like to make offers with a deposit of $1,000. These offers are rarely accept. Because the seller figures if the buyer only has access to $1,000 why would anyone lend them hundreds of thousands of dollars to buy a property.
So even if you need to do a redraw on your home loan, offer a deposit of at least 5%, but if you have 10% even better. If you can’t access 10% of the purchase price in any way, it’s unlikely that a financial institution will lend you 90% of the money to buy the property anyway.
Big deposits show the seller that you are here to buy and serious, plus you should be able to afford it.
The good news is usually you only need to make a small initial deposit which is 100% refundable. If you are unable to obtain finance. Then once your finance is approve which is usually around 14 days before you settle you need to come up with the larger deposit.
WAIVE THE 5 DAY COOLING OFF
In Qld you have a 5 day cooling off where you can get out of a sales contract. But if you choose to terminate under the 5 day cooling off the seller can charge you a fee of around $1,800. Because of this very few buyers terminate under this clause. Instead if they get cold feet they terminate under the finance clause. You can read more about the 5 day cooling off on the qld department of fair trading website here.
By waving the 5 day cooling off period, along with a large deposit to show the seller you are very serious about buying the property this gives them incredible confidence in accepting your offer.
BUILDING AND PEST
Usually a building and pest inspection needs to be done on almost all property purchases. It’s now even common that the seller has had one done for the sale. They do this so they can see for themselves if the property has any issues. Plus to make it as easy as possible for the buyers to buy the property. If a seller has done a building and pest report. It’s important to realise these are independent reports done by a licensed inspector. So as a buyer there should be no reason you would need to pay the $600 to do your own. You should be able to use the report that’s been done. And speak to the inspector too if you feel the need.
If a report has not been done. Yep you need to get one. The first thing is to decide what time frame you’d like to have the report completed by. Solicitors love to have this time frame to be the same as the finance, which is usually 14 days but sometimes 21 days. But it’s been years since I’ve accepted a 14 day B&P clause. Because 7 days is ample time to have an inspection done. By getting this out of the way it gives the buyer and seller piece of mind that, “tick” it’s one condition met. But also if you do find issues, it gives you time to have all that looked at while we all wait for finance to be approved. Agreeing to a 7 day building and pest clause is a small compromise as a buyer that will go a long way in having your offer accepted.
To give yourself the best chance at securing the property, have as few conditions as you can. The two most common conditions are subject to your ability to obtain finance within 14 days. And subject to a satisfactory building and pest inspection. However if an independent building and pest inspection has already been done. If you look through this first and are happy with it, then there is no reason your offer can just be subject to finance.
At present some finance brokers are asking for 21 day finance clauses, but if they have done a full pre-approval 14 days should be enough and a 21 day clause will reduce your chances of the offer being accepted.
Sometimes buyers need to also make their offer subject to the sale of their current property. That’s fine too but it greatly reduces the chance of your offer being accepted. To give yourself the best chance, agree to sell through the same agent as this will allow that agent to control the process and keep all parties up to date. But also get your property onto the market immediately. Like have your first open home that week.
Of course there are other conditions you can add to a sales contract too like subject to a due diligence. It’s a great clause because it allows you to check up on almost anything. But again a clause like this will limit your challenges of your offer being accepted.
DON’T BE TOO CHEEKY WITH THE PRICE
I get it. You want to get the property at the best price you can . But why is that? The home I live in now my wife looked for 2 years and when she found it I asked the owner what he wanted and paid it. I paid fair market value & I am in the real estate industry. But it’s now worth over $200k more than what I paid for it due to capital growth & that’s the thing because of how real estate works long term, paying fair market value is OK. The amount of buyers I meet who look for a very long time, make low offers, then miss out and have to keep looking is alarming.
But I also understand you don’t want to “over pay”. So when you make an offer, don’t ever offer your final price. Start a little lower then hear what the seller has to say and make a few adjustments. I’ve sold properties where I’ve had to go back & forth 8 times over 7 days. Which I’m happy to do. But it’s smarter to listen to the agent and as long as you feel you are paying around fair market value. Make 1 or maybe 2 more counter offers, secure the property and get on with your life. Life is short. In a few years to come you’ll probably say “Wow, I can’t believe how cheap I got that”.
When we moved to the Sunshine Coast Qld in 2005. We bought a home in Buderim for $330,000. We still own it now and when I tell people what we pay they all say the same thing, “wow you got that for a bargain” But not really. That was just fair market value at the time.
GET HELP FROM THE SALES AGENT
A good real estate agent in the local area will be full of knowledge. And should be able to help you understand the current value of properties. Properties that are price at market value or just under are much harder to negotiate unless the seller is in a rush to sell. However, homes price over market value that have been on sale for a long time can often be secured at a lower price. As the owner becomes more motivated.
As a result, making an offer below the asking price with accurate market research & the help of a local agent, will sometimes get you a property cheaper than the asking price.
When I am asked by a buyer if there has been any interest, I’m honest about that. But often when I tell them yes, we have a few buyers looking to make offers, many people don’t want to believe me. After all I am a sales agent. Then they are shocked when they see the property is under contract.
So if you see a property you like. Just jump on it. So many buyers tell me they want to think about it only to find that the next day, someone else has secured the property.
ASK FOR REPAIRS, WITHIN REASON
Keep in mind the property you are buying is probably second hand. So it’s going to have a level of issues. The last two homes I buy both had termites, but I still bought them because I was aware of them. And knew it was something I could deal with and something I had to look out for in the future.
But if a building and pest report find issues, you can ask they be rectified, ask for a small reduction or simply buy the property knowing they are there. The main thing is to communicate openly and honestly with the sales agent so a conversation with the sellers can be had.
PERSONALISE THE OFFER
The last house I live in now. I asked the owner what he wanted and paid for it. But with my offer I also included a one page handwritten note about what we loved about the property. You should do that too. It will humanise your offer, and show the seller who their home is going to, making it easier for them to like you and for them to want it to be you that’s the new owner.
Negotiating in real estate must be done in a strategic and thoughtful way. Acting like a bull in a china shop will not get you anywhere other than leaving you frustrated. Having an experienced agent guiding you can make all the difference and even help in negotiating if you’re too shy to ask yourself. If you have any queries and need tips for buying a property or house, feel free to get in touch with us!