“An offer they can’t refuse” 21/05/12

This weekend while working on a villa purchase for a young couple, I came to think about the section of the purchase/sale process referred to as “the offer”. We had done all the running around and found the property that best matched the criteria, and now was the time to open the negotiation with offers. This is the part of the buying process that most people tend to botch up. And getting it wrong here is what costs you money.

There are a few things to remember when putting your best foot forward and securing the property. Understand though that this is not a fixed and firm plan, and not all negotiations go the same way.

With this in mind there are a few simple rules to keep in mind when you open negotiations with an offer, and here they are:

  1. An offers not an offer unless it’s in writing. Simply put make sure the ONLY time you start talking price is with a signed copy (by you!) of the contract of sale and the acknowledgement page of the section 32 (In Victoria).  Put the price you want to pay on the contract and submit it. If you just tell an Agent what you wish to offer then it remains just a conversation. The fact is the selling agent will rarely sit down with a Vendor unless they have a documented offer. And if you are smart and maybe a little lucky, they may just take your first offer and sign the document.
  1. An offer’s not just about the cash. Remember that you need to detail all the other important things on that contract of sale that make up your offer. Things like how long you need the settlement to be, how much deposit you intend to pay, when you intend to pay the deposit and any special conditions, such as subject to finance or building inspection clauses, and when these expire. Just about everything in an offer is negotiable, and it’s important for both parties to negotiate the details so that it suits them both. You are allowed to ask for things in a contract of sale, that’s why it’s called an “offer”.
  1. Open strong. In this market and for the most part, the “smart” people will tell you to lowball the agent on the first offer. Sure, sometimes there is a place for this, but for the most part I recommend the first offer is at the very least “sensible”. Sure the Vendor is less likely to accept your first offer, but if its twenty or thirty thousand dollars off what they want as opposed to one hundred thousand dollars away from their reserve, then they are more likely to take you serious. If you insult them with your first offer, there is a chance you will lose the buy. Emotions get in the way on both sides you know. Offers that are low but close in my experience tend to lead to a quick to and fro and a deal getting done in the shortest time.
  1. Speed kills. There is no rush for the deal to be done within 24 hours of the first offer going in guys. Might I suggest that on occasion, patience is a virtue.  When you put an offer in and it’s rejected, ask the agent where the vendor’s head is at, thank him or her and then ask for a bit of time to think it over. No need to rush the second round. This gives the vendor a chance to dwell on what you originally offered and they are more likely to take round two a little more seriously. If you rush in to try and get things done ASAP you may get caught up in the process and drive your own price point up. Even IF there is another buyer on the scene, set your own pace. Never let the “someone else” drive you past the point where the property represents good value. If you want a suggestion, try a day and a bit between offers. If the agent calls you in between that time, it’s a good thing.

Those four points alone are a simple formula to follow for offers on private sale properties. Understand however that even though you are signing contracts, they are only ever offers until such time as the Vendor counter signs. You could make 3, 4 or 5 written offers and not get it counter signed until the 6th! ONLY when its countersigned by the vendor is it a deal.

One other tip too. There is a little box hidden on contracts of sale that says “this offer is valid for [  ] days”. It’s best to put a 1 or 2 in that box people.  Unless specified, an offer is only valid for a maximum of 3 business days, however so is your cooling off period. Three days from when you sign! Effectively an Agent could sit on your offer for three days and have the Vendor sign on the third day, and there goes your cooling off period.

When you are buying, try to do it on your terms, and it’s the right type of offer that sets those terms. Negotiate hard, but fair. Have fun and buy well.

 

 


Garry McPherson

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3 Responses to this article

 
Sam Rapke May 21, 2012 Reply

Hi Garry,
Great post! some really good points for people to consider when making an offer. I love point 3 about going in with a serious offer. too many people burn themselves going in too low and upsetting the vendor to a point they get frustrated and wont look at any further offer unless they are right on what they are asking.

 
Garry McPherson May 21, 2012 Reply

Thanks Sam. We tend to forget at time that its “people” we are deling with. Treat them with the respect that you would expect and the whole process flows. That doesnt mean don’t chase a bargain though. Everyone loves a bargain!

 
Blake Carvington May 21, 2012 Reply

love the suit

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