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Making an offer to purchase ( IP or PPOR )

Discussion in 'Real Estate' started by Here_To_Learn, 29th Oct, 2007.

  1. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Hi all ... no doubt there has been many discussions on this topic but I would like to ask others the following questions ...

    So here goes -

    1. What steps/ process have you followed for making an offer to purchase a home ?
    2. What would you do different next time ?

    I think it would be great to produce a 'best practices' ( YES- I am still in the corporate world :eek:) home offer checklist.

    Let's see how we go ...
     
  2. Jacque

    Jacque Team InvestEd

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    Hi HTL :)

    I've been around offers a few times now :D ;) so feel qualified to provide some tips or "Best Practices" input to this thread.
    In short, I don't believe there are any!
    Going against the grain here, and no doubt contrary to many others opinions, I've come to the conclusion that, due to the very individual nature of each property purchase, vendor, buyer, and consequent motivation and desired outcome, there is no right or wrong way to approach offers. You really need to assess the situation based on the information you have both garnered from the agent and on your own to decide on how to best approach it to achieve the best outcome for yourself. You need to know beforehand what your maximum buy price is and you need to know the market thoroughly enough to walk away from this, if you believe the property isn't worth this amount in the current market.

    What I will say, however, is that when it comes to offers, it pays dividends to be in the strongest buying position at the time of making your offer. This includes being financed, possibly (but not always) having carried out the appropriate searches (building/pest/strata/council) and having had your friendly conveyancer/solicitor take a look over the contract to ensure you're fully informed about what exactly it is that you're seeking to purchase.

    Some vendors prefer written offers- but others don't.
    Some agents like to ring around all the buyers and start playing dutch auctions- but others don't.
    Some sellers will accept pre-auction offers and some won't.
    Some sellers and agents will insist on an EOI deposit and others don't.
    Sometimes your offer won't make it to the vendor at all whilst other times it will be presented as less to make the agent appear "a great negotiator"
    Some offers will be laughed at and justifiably in some cases, whilst others will be accepted to your utmost surprise and delight.
    An offer can have an expiry time if you wish to proceed down the ultimatum path (not recommended) or you can leave it open but re-negotiate days/weeks/months later.

    Looking forward to seeing what others can add here.
     
  3. Danny

    Danny Member

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    Having just gone through the offer process for my first PPOR I have to say that it was a far more "emotional" time than with the IP's that have been bought purely for the future return or development potential.

    I'd have to agree with Jacque that being in the strongest possible position when making your offer, including having finance approved and the contract checked out by your conveyancer, is a great place to start.

    Know your market and be willing to walk away, this helped in our case as having researched the market with the help of a local real estate agent I work with on a professional basis we knew what a reasonable expectation was not only for true value, but also real value in the current market.

    If the agent will only accept a written offer, as was our case, include your justifcation or reasoning for the offer price with the expectation that this is provided to the vendor. The agent and vendor then know you're serious about the offer and not just throwing something out there in the hope of a bargain. We ended up having to increase our initial offer by a token amount to secure the sale but were still below what we expected to pay (and well below what it was listed at!)

    Finally, if you're financing the purchase, keep your lender in the loop and ready to act, especially if a valuation is required and keep the agent abridged of what is happening. Keep "the ball in the scrum" so to speak. Our exchange has been delayed by approx 10 days due to difficulties and finger pointing about the valuation visit, something I'd like to avoid next time. By keeping everyone in the loop, we've managed to stick to close to the original settlement date to satisfy both the vendors need to sell the property and my need to avoid moving across the Christmas period.

    Our exchange is due by Thursday pending the vendor's return from interstate and then I'll start breathing a little easier........ at least until the first mortgage payment is due!

    Danny
     
  4. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Thanks Jacque and Danny.

    I have heard of people that have a valuer go out and inspect home prior to making an offer. This sounds kind of awkward to me. Has anyone done this before ?
     
  5. Jacque

    Jacque Team InvestEd

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    Hi HTL

    Yes, this seems to be more prevalent, however, when it comes to the high end purchases as buyers are unsure as to how much to offer or know whether or not the property represents fair value.

    Valuers can certainly provide you with an objective valuation based on the techniques they apply to the science, however property isn't always "scientific" and anomalies are common between purchase price and valuation :) A recent example was a relative of mine, with one valuation coming in at $680K and the next at $880K!!!! Go figure!!

    In my agency, we actually provide a report which, whilst not classified as a valuation (as we are not licensed valuers) is a totally objective appraisal of the property in the current marketplace. We also include imperative information such as council searches, rental yield and cap growth rates data, a written rental appraisal as well as a full CMA on the property in question. These reports aim to provide peace of mind for our property purchasers and have been extremely popular to date. After all, when you're spending half a million dollars, it pays to get a second opinion on value, if you're not "quite sure".

    If getting a valuation or second opinion (especially important if you don't know the particular area or are unfamiliar with current market movements) makes you feel better in your decision making process, and ultimately decides whether or not to make an offer on a certain property, then go ahead and do it. It's your investment, after all, and you need to conduct sufficient due diligence to ensure that you're buying a product that suits.
     
  6. jenpalex

    jenpalex Active Member

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    What a great opportunity your valuers have presented you!

    Show your low valuation to the vendor and your high one to the bank.

    The Brad Sugars book I have just finished reading (title forgotten sorry) had some good tactics, including negotiating with the vendor direct. Looking through a few 'gurus' ' books should allow you to gather a list of options
     
  7. Jacque

    Jacque Team InvestEd

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    Good tactic when you're selling, I'll agree, but not when you're simply refinancing :)
     
  8. Babi

    Babi Member

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    Hi Jacque:

    I'm on the hunt for a document I saw and forgot to bookmark (I think it was posted by you, but not sure now). Do you know if there is a pre-auction offer letter/template available online?

    Nervous about my first home purchase:

    - its up for auction
    - the agent quoted $350K
    - I have pre-approval for ~$410K
    - I've spent to have it inspected (no major issues) & valued ($390K)
    - I'm optimistically hoping to win, with a max spend of $370K

    It's going to be a tough run, but am doing my (nervous) best :)
     
  9. Jacque

    Jacque Team InvestEd

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    Hi Babi

    Sorry it's taken so long to answer this Babi but feel free to pm or email me and I'll pass on that template to you if it's not too late!
    If so, then please let us know how you went :)
     
  10. black199

    black199 New Member

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    i know its an old post but am interested in getting my hands on this pre-auction offer template if possible. would be great help! thanks