First of all, congratulations on finding a property!
The first thing we need to do is express our interest to the real estate agent. This normally take the form of a verbal offer. In terms of the amount to offer, that will depend on a few things:
- How long has the property been listed for (i.e. how desperate are the vendors/sellers)?
- How busy was the inspection?
- How many sales have there been in the area and for what value? Have a look at http://onthehouse.com.au for information like this.
- How much you feel the property is worth?
When you make an offer to the agent, you will want to say that your finance is pre-approved. This gives the agent a level of comfort that you are all organised. The offer will then be taken to the vendor and negotiation may ensue. Once you have agreed on a price, you will need to put pen to paper. There are three main ways to do this:
- Exchange with a 10 Day Cooling Off Period (Strongly Recommended).
In this option, you sign a contract with a 0.25% non-refundable deposit which prevents the property from being shown to anyone else (this doesn’t mean that other verbal offers can’t be made). This time allows you to obtain Inspections, Strata reports or whatever documents or searches that your Conveyancer requires before Unconditional Exchange. It also allows us to have a property valuation performed and get the loan Unconditionally Approved. The reason we want 10 days (rather than 5 or 7), is that any extension has to be approved by the vendor and obviously won’t be if there is a higher offer floating around. If they deny the extension, you will lose your deposit.
- Verbal Offer, get full approval, then Unconditionally Exchange.
Occasionally, the vendor or agent won’t want to sign with a cooling off period and push you to Unconditionally Exchange (put down the full 10% deposit). This option can only be done when there isn’t another buyer (or likely to be) that will be willing to exchange unconditionally. In this case, you have a verbal agreement with the vendor and we quickly do everything we need (as above) before you put down the full deposit. In this option, you are open to losing the property, but not committing before you a fully ready. They may require a refundable $500 holding deposit in this case.
- Immediate Unconditional Exchange (No other choice).
If neither of the above options is viable, then you will have to put down a full 10% non-refundable deposit. This fully commits you to the property and obviously secures it against other offers. The risks with this option is that if something goes wrong and you chose to walk away, you will lose your deposit. The potential things that can go wrong are with the finance (e.g. valuation issues – property isn’t worth as much as you are paying), property inspections, strata reports or the results of any other checks we need to do.
You should also work with your conveyancer before signing contracts so they can give the appropriate advice. Keep in mind with the above, that you don’t have these options in an Auction. If you win an auction, you are Exchanging Unconditionally and fully committing to the property.
We hope this information helps with this (sometimes daunting) process. Once you have agreed on price, we will need the following information:
- A copy of the front page of the Contract of Sale, unsigned at first and then a copy of it once you sign it.
- All of the property details, such as address, purchase price, the real estate agency name, phone number and name of the sales person and his mobile.