How To Make An Offer On A Property

In a hot property market like we’re experiencing at the moment, it can be difficult to beat the competition at auction. And with auction clearance rates running at around 80per cent in most capital cities, it’s clear that the majority of bidders miss out on the property they’ve chosen when the auction gavel comes down. So, how can you avoid going to auction? What can you do to secure a property when you don’t have deep enough pockets to outbid the competition on the day?

A good strategy is to try and secure the property by making an offer prior to auction day. Whilst many vendors will prefer to allow the market to dictate the best price for their property, many are open to offers before auction day.  Here are a few tips to help you make an offer that’s accepted and avoid the hassle and inflated prices that auctions can create.

Do your homework

Before you make an offer, you need to decide on an offer price. Start by researching recent sale prices of comparable properties in the area. This will give you a starting point for setting a fair offer price on the property you wish to purchase and give you a good idea of the vendor’s price expectations. It will also tell you if the property is in your budget and worth more of your time.

Next, research the property itself by obtaining building and pest inspection reports. If there are any problems with the property you can cite these as reasons why you are offering a bit less. 

Another factor that you may need to research is demand for properties of this type in this particular area. Demand sets the price of a property and it may be high for a variety of reasons – schools may be particularly good in the area, the area may be about to undergo attractive infrastructure development projects like better public transport links or a new shopping center and so on. If demand for the property is likely to be high, you may need to make a higher offer to succeed.

If your research does not help you come up with a reliable offer amount, don’t be afraid to ask for professional help. A valuations expert can help you assess what the property is worth in today’s market. If you need a professional valuation, ask us for a referral and we’ll be happy to help.

Get to know the real estate agent

Negotiation is a two way street – so it is important to have a good working relationship with the real estate agent who is in charge of negotiations on behalf of the vendor. Make sure they see you as a serious buyer and they will be more respectful of your requirements and negotiations.

Remember that the real estate agent has the knowledge that can help you work out how best to play your hand. Here are some questions you can ask to help you formulate your offer strategy.

• Why is the vendor selling?

• Whate price is the vendor expecting?

• What are the vendor’s requirements regarding settlement? Do they want a long or short settlement, do they need to extend their stay in the property?

• Is this an investment property or the vendor’s home?

• Have they already bought elsewhere?

The answers to these questions will help you decide how to proceed – or even if you will proceed to make an offer at all.

Formulate an offer strategy

Once you are fully informed, you will need to think carefully about how to present your offer. By now, you should have an upper price limit firmly fixed in your mind based on your estimate of the property’s value and your budget. No matter what happens during the negotiations, never go above your upper price limit. It’s easy to be influenced by your emotions and the clever negotiating tactics of the real estate agent, so this is a hard and fast rule you should always stick to.

If you are hunting for a bargain, it may be tempting to make a ridiculously low offer for the property. However, this could be a mistake because the real estate agent could dismiss you as a serious buyer. If you have a legitimate reason for making a low offer, be sure to tell the real estate agent why you are offering a reduced price so that they continue to take you seriously.

If you really want to obtain the property, you will need to make a genuine offer.  A good idea is to offer a bit below your estimate of the value of the property. This will mean your offer is taken seriously and give you some room to negotiate upwards if the vendor does not accept your first offer. 

Do whatever you can to make your offer more attractive to the vendor. To do this you could offer to meet the same terms they would receive at auction, offer a larger deposit, meet their settlement terms or offer to extend their stay in the property after sale.

Be ready for the negotiation process

The negotiation process will begin once you submit your offer in writing to the real estate agent. Verbal offers are not acceptable – your offer must be in writing and signed by you before they can present it to the vendor.

Once this is done, the vendor will either accept your offer, reject it completely or come back with a counter offer. If they reject your initial offer or come back with a counter offer, then you can raise your offer price – or walk away. The choice is yours.

Sometimes the real estate agent will tell you they have already had a better offer and use it to get you to raise your offer price. Do not allow this commonly used tactic to influence you to offer above the limit you have set for the property. Make sure your subsequent offers are reasonable and fair.

Remember, auctions cost money so it can often be in the vendor’s best interests to avoid going to auction too. Once the vendor accepts your offer, you will be asked to sign a contract agreeing to the purchase and the negotiations are done!

Be confident

Negotiating can be a nerve-wracking experience, so it is important that you are confident about the offer you make. Doing your homework will certainly put you in a position to negotiate confidently – or walk away if the situation just isn’t going to beneficial to you.

Be sure of your budget and never exceed it. Putting yourself in a difficult financial situation simply to secure a particular property is not worth the ongoing financial pain. To help yourself negotiate from a confident place, talk to us about your budget and we’ll help you to get pre-approval on your financing to give you more negotiating power. 

Remember, we’re here to assist you in any way we can. Come in and talk to us about your plans and we’ll help you to secure your financing ahead of time. It’s a great time to be in the market for a property, so call us today.

New Homes & Construction Loans

Over the last 18 months, our hot property markets have been driving rapid increases in home values, particularly in larger markets like Sydney and Melbourne. This has placed established properties beyond the reach of many home buyers and as a result, we have been seeing a corresponding boom in new housing construction across the country.

For the year from March 2014 to March 2015, there were 210,484 new dwelling approvals which is a healthy 11.2per cent increase over the previous year. And whilst the most recent figures for April this year show a slight decline in apartment approvals, there were 10,130 new house approvals which was an increase of 4.7per cent over the previous month.

Thinking of building a new home? Talk to us. 

From these figures, it’s clear that more and more people are finding it attractive to build a new home rather than compete in today’s hot property market for an established house or apartment. 

And why not? Building your own home not only has the potential to save you money, it gives you the opportunity to get the home you’ve always wanted – one that’s tailored to your personal needs and requirements with all the bells and whistles you may not be able to afford in an established home at today’s prices. New homes also help you plan your finances with confidence, with low maintenance costs and no major repair expenses in the foreseeable future.

Obviously there are some drawbacks to building a new home, compared to buying an established property. The construction process takes time and you may have to wait a while before you can move in. Additionally, if you’re building in a new housing estate, it may be some time before features like schools and shopping amenities catch up with the measure of convenience you’re currantly enjoying in an established suburb. 

Financing a new build is also a bit different to financing for an established home. Instead of a straight forward mortgage, you may wish to consider a Construction Loan product that can help take the hassle out of the building process. 

Construction Loans – how do they work?

With a regular mortgage, you pay a deposit and the lender pays the remainder at settlement in a lump sum – it’s fairly simple and straight forward. Construction Loans differ from regular mortgage products as they pay for the project in stages, paying your builder as construction progresses through each stage – slab, roof, lock-up and completion. Additionally, Construction Loans usually last for the period of construction only. 

The major benefit to a Construction Loan is that you only draw down on funds as you need them. This can mean big savings on interest as you only pay interest on the money you use at each stage. And once construction has been completed, you can often nominate which home loan product the Construction Loan will revert to, moving forward – ie. A standard variable rate loan or a fixed interest rate loan.

Another thing to take into consideration when building your own home is purchasing the land. If you purchase the land first, you will usually require a regular mortgage for the land portion of the purchase and then apply a Construction Loan to the build only. The loans can be arranged separately, but are usually bundled together, particularly with a house and land package deal you may purchase from a developer.

There are quite a few different Construction Loans on the market and each of them can be structured differently. We’re here to help you obtain the best loan product/s for your individual needs, so before you commence the process of building your own home, it’s wise to spend a little time with us to get the right financing lined up for your needs. 

What else do you need to think about?

Just as with a regular home loan, you will require a deposit before you can commence building your dream home. The amount of deposit you need will vary according to the cost of the project and the lender’s requirements, so you should talk to us about how much of a deposit you will need. 

Before you commence your build, you should also be very careful to establish exactly what is covered for the price, as there could be other expenses that you need to budget for. We recommend that you also have some contingency funds set by, just in case of unforeseen expenses that may not be covered by your Construction Loan.

Talk to us for more information

Building a new home may be a great idea for you and your family, depending on your personal financial situation and circumstances. If you’d like to find out more, or explore your loan options and establish your budget for a new build, why not give us a call? We’re here to help you discover if building a new home is a viable option for you and to help you get pre-approval on a suitable financing package before you begin. A short chat could help to take a lot of the hassle and uncertainty out of the process, so why not give us a call today?

Finding The Perfect Investment Location

In recent years, the law surrounding home loans and other kinds of credit has been revised and much stricter rules were imposed on mortgage lending. You may have heard about the NCCP (National Consumer Credit Protection Act 2009) in the media since then – but do you know what it means for you? This article outlines what the NCCP does and how it benefits you as a borrower.

Regulating lenders and mortgage brokers

The NCCP is legislation (now in law) that is designed to protect you and ensure that there are ethical and professional standards in the finance industry. To enforce these standards, the NCCP requires all lenders and mortgage brokers to hold a credit license or to be registered as an authorised credit representative of a credit license holder.

The authority that enforces these rules for lenders and mortgage brokers is called the Australian Securities and Investments Commission – also known as ASIC. ASIC regularly audits lenders and mortgage brokers to ensure we are adhering to the rules set out in the NCCP. 

You can rest assured that we strictly adhere to the professional standards outlined in the NCCP. We are strong advocates of high standards of ethics in mortgage broking and the finance industry, so you can rely on us to give you very professional support and advice on your mortgage and other credit needs.

Regulating how we do business with you

When you apply for a mortgage through us, we are required to follow a specific process under the rules of the NCCP, to ensure you get the very best result. In fact, the NCCP has an entire chapter devoted to the concept of “Responsible Lending”. In order to be sure that we are being responsible when suggesting mortgage products to you, the NCCP requires us to:

1. Make enquiries into your financial position, requirements & objectives.
2. Verify your financial position. 
3. Make a preliminary assessment using the information gathered in steps 1 & 2, about what loan types are appropriate and suitable before recommending them to you.

What makes a loan product ‘unsuitable’?

In order to protect your interests, the NCCP requires us to take every step we can to ensure you get the best possible product and rate for your needs. To help make sure this happens, the NCCP Act defines situations where a contract or product will be unsuitable, to include where:

➢ You may be unable to meet the loan repayments, or may only be able to meet them with substantial hardship; or
➢ The loan does not meet your requirements or objectives.

These rules are the reason why we spend so much time and effort getting to know you and your financial position before we start organising or enquiring into loans. In order to behave responsibly and make a reasonable assessment about whether or not a loan product is suitable for you, we need to fully understand your personal circumstances and financial position. 

We often receive enquiries from people who would just like to know the best interest rate available today. Unfortunately, the rules of NCCP mean that giving such a quote would be irresponsible – and most likely inaccurate. It’s not until we’ve made enquiries into your personal circumstances and financial position that we can put together a selection of appropriate loans and help you choose the most advantageous interest rate from amongst them.

Documentation we must provide to you

Under the rules of the NCCP, we are required to provide you with comprehensive information as soon as it becomes apparent that we are likely to do business with you. That’s why our Credit Guide sets out important information about us and the services we provide to you as your broker. It outlines the information we will need from you in order to make the preliminary assessment described above. It also tells you what to do if you have a complaint and how to go about getting it heard and resolved.

Additionally, if you would like a copy of our preliminary assessment (and we haven’t given it to you already), you can request that we give you a copy at any time.

Talk to us, we’re the professionals you can rely on!

As your mortgage broker, we aim to provide you with truly professional assistance in your financing needs. With the highest ethical standards in place, you can rely on us to help you get the right home loan for your personal circumstances and financial goals.