11 May How to Make an Offer in Real Estate
If you’re making an offer on a home, particularly if it’s your first home, the whole process can seem daunting. In this real estate video Henry Wong breaks down the various steps on how to make an offer in real estate, from once you’ve found a home until settlement is completed.
Here’s what he has to say on how to make an offer on a home.
“Hi, I’m Henry Wong. We’re here to have a look at how to make an offer. You looked at a few properties and you’ve honed in on this one particular property that you’d like to make an offer on.
The first part of making an offer is the price. Now with regards to the price, it’s quite self-explanatory. There are two things. There’s a price you’re happy to pay with. If you can get it at this price, you’re as happy as Larry. Number two, there’s a price you’re not really that happy to pay, it’s a bit of a stretch, but you don’t want to lose it for. So what I mean by that is if a property you’re looking at making an offer is $1 million and you found out that it was sold to the next buyer for 1 million and 10,000, and you’ve could have paid 1 million 10, or even a million and 11, then that’s the price you don’t want to lose it for.
Because if you make an offer at a price you don’t want to lose it for, what that means is that you’ve done your best. If it’s meant to be, it’s meant to be. If it’s not, then it’s not meant to be. That way you have no regrets. What I’m saying is make an offer at a price that you won’t regret, because sometimes in a hot market, when there’s multiple buyers competing, you may actually lose out on a few properties if you pay, I guess a bit too low, but at the end of the day you’re the buyer, you need to be happy with what you buy and how much you pay for.
Number two, we look at the deposit. Now the deposit is usually around 5 to 10% of the contract price. There’s two ways, you can pay 5 to 10% straight up, or once the seller accepts the contract, or we can split it up. You can just say, “Okay, I’ll pay $1,000 now. And then the remaining 5% on unconditional.” What that means is that when the finance and building and pest is passed, you pay the remaining 5%.
Number three, you have the cooling off period. This is not an auction. The cooling off period is five business days. You as a buyer have the right in Queensland to change your mind within five business days. You can say, “You know what? I changed my mind. This property is not for me.” If you do use that reason to get out, you need to pay a penalty of 0.25%. That is actually not free, to use this reason. It actually costs you money. Say for example, you signed a contract at $1 million. 0.25% is two and a half grand. It will cost you two and a half grand to get out if the property is $1 million and you use the cooling off period to change your mind.
As a buyer, you also have the right to waive the cooling off period. It just shows the seller that you’re serious about buying, you want to waive the cooling off period. That choice is entirely up to you as a buyer.
Number four, the finance. Now the finance clause can be anything from 7 to 21 days. That depends on a lot of things, and your financial situation.
After finance we have the building and pest, so the building and pest condition, it can be from 7 to 14 days. Now with the building and pest condition, what I do suggest is that you’re physically there or a friend or family member is there at the actual building and pest inspection, because the report can be quite thick.
Number six, sometimes you have special conditions. If there are any, one of your special conditions is some people would need to put a condition subject to sale of my home, or subject to the seller fixing a few things prior to settlement. That’s what I mean by special conditions. But most of the time there are no special conditions.
And number seven, we have a settlement. A settlement period can be short or long. It can be 30 days, 60 days, 90 days, et cetera. Most sellers are looking at a shorter settlement than 30 days, but I guess it’s something that you can negotiate with.
There you have it. These are actually the components of an offer. The price, make sure it’s a price that you’re happy to pay. I would suggest you want to pay your best price, as you don’t want to regret that you could have paid a little bit more and someone else paid more than you. Have no regrets in terms of the price that you offer.
Number two, the deposit. The more deposit, the better. It shows more conviction from yourself as a buyer to the seller. Deposits are usually 5 to 10%.
Three, the cooling off period. It’s up to you whether you want to keep the cooling off period or wave it.
Number four, finance is usually between 7 to 21 days. You can also have the right to waive the finance clause as well, so it’s not subject to finance. That’s entirely up to you.
Number five, the building and pest is usually 7 to 14 days. You can have that clause, or you can actually waive that clause if there’s a building of pest provided. The choice is up to you as well.
Special conditions, as I mentioned before, this could be a subject to sale of my home, subject to the owner fixing a few things, subject to the owner providing certain reports, whatever that may be. Most of the time it’s actually empty.
Now with settlement, settlement is usually 30, 60, 90 days or whatever you negotiate with the agent or the seller. If you have any other questions on how to make an offer, feel free to contact me and I’m more than happy to answer them.”