How do I Make an Offer on a House Without a Buyer’s Agent?
In this market, right now, house hunting is a blood sport, so when you finally find The One there’s no time to waste. You need to know what you’re doing if you’re going to outsmart the competition and get your bid at the top of the pile.
And before all my Buyer’s agent friends call me ask what this article is all about, I’ll declare right now that I’m a huge fan of using Buyer’s agents as they represent you – the buyer – and are trying to ensure you secure the property at the right price.
Buyer’s agents are also the ones that are experts at most of things I talk about here but if you’re new to this, or it has been a long time since you bought your last property, there are a few things you need to be aware of.
So if you’re embarking on a property purchase without a buyer’s agent by your side, then it’s important you understand some areas that could present challenges.
Assessing value
One of the most important questions you’ll need to answer is around purchase price. How much is the property really worth? Is it priced well? Overvalued? Undervalued? How can you tell?
This is where you need to do the legwork and research the market for yourself. There is no shortage of material freely available online that will help you understand the market climate at the moment.
Something worth noting – as at time of writing (March 2021) property markets in cities around the nation are running very hot with demand outstripping supply. Staying abreast of values in the shadow of these fast-moving conditions can be challenging.
Visiting open homes and talking to agents about their expectations for the property will give you a good indicator of where demand vs supply levels are sitting. Look at homes in similar price points and keep an eye on those homes, regularly checking in with the agent to see if they sell quickly and above or below ask.
At the open home, the agent may share comparative market analysis (CMA) with you and this will give a clear indication of recent sales in the area, and how they compare with the property you are visiting. Make sure the sales in the CMA are within the past three to six months at the very maximum – in hot markets you’ll want them even more recent. If you can’t make a reasonable judgement of how a market has changed since the date of a comparable sale, then it’s of little relevance.
https://www.domain.com.au/ and https://www.realestate.com.au/buy are two major sites that offer insights and analysis into the market, but they are not the only sources of information. Research using a wide variety of sources. In this property-obsessed nation, there is no shortage of websites delving into the details about our property market and how prices are faring.
Get ready to engage
Ask the seller’s agent how they would like to receive offers.
Also, ask why the vendor is selling. This information could prove very handy down the track when it comes time to talk terms and gives you an opportunity to tailor your contract conditions, so they appeal to the seller (see below).
If you’re ready to put in a firm offer, the agent will tell you how the vendor would like to receive offers. Some may consider a verbal offer, but it’s increasingly rare these days. After all, a verbal offer can disappear in the wind, leaving the agent and the vendor high and dry.
If you’re not quite ready to complete the contract of sale, you may be asked to complete an expression of interest, or to complete a form confirming your offer. Just be aware that by completing the offer within the contract of sale, the agent is obligated to present it to the client (unless the client has expressly outlined conditions that preclude the offer being presented, such as only presenting offers above a certain dollar value).
Negotiation
Given it’s a rare instance, particularly in a hot market, for a verbal back-and-forth negotiation, be prepared to put everything in writing. Agents in the current market are really only accepting written offers and with plenty of people hammering on the door wanting to buy, they hold the cards.
Most people think it all comes down to price, but there are a number of ways you can make your offer the most appealing, and it doesn’t always mean offering more money. Sellers are motivated by different factors and while price is almost always high on the list, often there are other considerations that can attract their attention such as:
- Cooling off period: If you’re absolutely positive that this is the dream house for you, you can offer to waive the cooling off period. This means a faster sale for the seller and if they’re in a hurry, this could be the thing that gets your bid over the line. Please note: It is strongly recommended you get a professional opinion before waiving your legal rights. You need to be very certain that this property is the one for you.
- Conditional or Unconditional offer: Similar to above, you don’t want to lose your dream home by having conditions in the offer that may prohibit a vendor making a conscious decision to sell. If you’re finance is in order and you are satisfied that the building is sound or have had it checked already, then waiving conditions can secure the property versus an offer, even with a higher price, but having more conditions.
- Deposit: Most people put the minimum deposit down because if the deal falls through and they lose a portion of it, then the smallest amount possible won’t hurt as much. A small deposit is a signal to the seller that you’re hedging your bets, or that you may have an offer on another home. By increasing the amount of the deposit to a larger amount, you are telling the seller that you’re serious. This could help make your offer more appealing. Vendors and agents view this as “hurt money” and would a buyer really walk away from that amount of cash?
- Building and pest: Anything that takes time, such as building and pest inspections, can slow down a house sale. If your vendor is in a particular hurry, you can offer to waive building and pest. Be aware, this is not recommended if you’re buying a property sight unseen. Having a building and pest report is strongly recommended to ensure you have all the pertinent information when negotiating.
- Shortened settlement: Most settlements are 30 or 60 days, but if your seller is in a hurry (or the opposite, wants the house sold but would like a lengthy period to finalise their affairs) then you can tailor this settlement period to sweeten the deal. Being negotiable in this area is still a misunderstood component in negotiations.
- Cash offer: If you have capacity to mix the offer with cash and finance, sometimes this may appeal to sellers for a range of different reasons.
- Pre-settlement inspection: A special not for those who are negotiating on their own behalf, without the guidance of an expert buyer’s agent – it’s recommended that you arrange a pre-settlement inspection. Make sure the property is in the condition you expect it to be in before the settlement. This really is a condition you shouldn’t volunteer to waive.
Once you have decided on terms with the seller’s agent, the next step is to have your contract read by a solicitor and then, executing the contract (signing it). Make sure you use a qualified legal advisor in your state, as the laws and process around trading property vary across the country.
Once all the conditions have been satisfied (building and pest, finance approved, sale of previous home, etc) the contract becomes unconditional, and the deposit is due. The next step is settlement, which is when finance representatives and legal representatives meet at a predetermined time to transfer the property ownership.
Then the house is yours! Congratulations!
A final note of caution: It’s important you draw on expert support throughout this process. Buying property is complex and expensive by the time you take into account state based stamp duties and fees and all this will likely raise many questions.
Ensure that you have a trusted source of advice by your side to help you through this transaction.
At the end of the day, there is a reason that Caveat Emptor applies in real estate transactions as Caveat emptor is a Latin term that means “let the buyer beware.” Similar to the phrase “sold as is,” this term means that the buyer assumes the risk that a product may fail to meet expectations or have defects.
In other words, there is no turning back now.
Good luck with your house hunting and negotiations!
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
with clients all over Australia and around the world. Andrew has over 30 year’s experience in the finance industry and has assisted clients to secure over $2 Billion in mortgage lending over his time. Intuitive Finance deals with all aspects of lending from helping first homebuyers, someone wanting to upgrade their home or starting out and experienced investors looking to secure that next investment property, we can assist with all those requirements. We also specialise in working with self-employed clients and getting them the best outcomes, along with Commercial and Asset finance solutions. Intuitive Finance is highly regarded in the industry and has been recognised as a national winner of the MFAA customer service award and also one of the finance industry’s top mortgage employers. Our brokers also feature regularly in the Top 100 mortgage brokers list in Australia.
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