Making an Offer - Private Treaty
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- Don’t go with your highest offer first, unless you know for certain that the owner is seriously considering other offers (just because the agent says this doesn’t mean it’s true). At the same time, there’s no point going in with a ridiculously low offer, because you could just get the agent and vendor offside.
- Find out as much as you can about the vendor from the agent. If the vendor is in a rush to sell because they’ve committed elsewhere, you might be able to knock more off the price, but don't forget that the agent is acting for the vendor, not you.
- Try not to give away how much you love the place, because the agent may then think they can get a better offer out of you.
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| Make an offer – Private Treaty
| Once you’ve sorted your loan and organised the inspections, you’re ready to make an offer or bid on a home at auction. In fact, you can make an offer even before you receive formal loan approval and the inspection reports, so long as you specify that the offer is conditional on finance or the results of the inspection.
When a property is being sold by private treaty, you make an offer to the agent, who will present that to the vendor. The vendor will then decide whether or not to accept your offer. Usually there’s some negotiating over the price – or another buyer could simply step in with a higher offer and you could lose out.
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Even when your offer has been accepted, it’s not legally binding on either of you until the contracts have been exchanged. You can still be gazumped – which means that the vendor could accept someone else’s better offer.
According to a Property Council of Australia report published in November 2006, average house prices in Australia, relative to income, have almost doubled in 10 years. And Macquarie Bank analyst Rory Robertson in February 2007 estimated that house prices have risen 75 per cent faster than wages over the past two decades.
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So how much should you offer? The rule of thumb has traditionally been to make an initial offer of 10 per cent below the asking price, so if it were a $500,000 property, you’d start by offering $450,000. But this isn’t always going to be right. You could still end up paying too much, or missing out on the home that’s perfect for you.
The best approach is to do your research first so that you know what the property is worth – based on what similar homes in that area have sold for – then make your offer based on that information.
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