Learn how to make a written offer on a property: include price, duration, conditions, and a finance clause. Deposits typically run 10% but can be 5% or a fixed amount held in agent trust. Engage a solicitor to draft the contract and protect yourself against gazumping, which can happen until contracts are exchanged.
Questions this video answers
May 10, 2024.
Usually 10% (but 5% is now commonplace).
As little as $500; $1,000 to $5,000 is more typical for small deposits.
0.25% of the purchase price.
Usually three to five days.
Chapters
So how do you make an offer? Some people ring up and give a verbal offer. They're not really taken that seriously. But then again, it would depend on the offer to really be considered serious. You should put an offer in writing. Anecdotal evidence indicates that if you attach a cheque for 10% of the offer amount, it increases the chance of your offer being accepted. Now, until the vendor actually countersigns the contract agreeing to your offer, your 10% is safe. To be even safer though, don't have anything in that bank account. The real estate agent's code of practice dictates that they must pass on all written offers. Here, you may occasionally have to remind a recalcitrant agent of this. If putting in a particular low offer, there are some things you need to include, the most important one being the price, then the duration of the offer and then the conditions. The conditions can be long and convoluted, or simple and straightforward. As a rule, the less you add, the greater the chance of having the offer accepted. But be brave. You can always remove clauses as part of your negotiation. There is a few you should really just always include, in my opinion. One of these is your finance clause. The point of this clause is to give the bank's valuers time to get out there and value the property and inform you and the lender that in terms of the security and the price and any risk associated is acceptable for them. And then only then is the loan approved formally. Some people include clauses about making things like the electrical appliances in working order at time of settlement. Now, you're going to have to get your electrician out there to check those, so remember to do that. But the list of clauses can go on and on and on. In some instances, though, a vendor has been so upset by a very lowball offer that they refuse to ever sell to that purchaser under any circumstances. But don't let this put you off. I've put in lowball offers and they have been accepted. To the surprise of the real estate agent, even it's not necessary to write your own letter of offer. You can make a formal offer by just submitting a completed and signed contract of sale of real estate. You would be advised to obtain legal advice prior to signing the contract. In any event, I run all of my written offers past my solicitor before submitting them. Remember, they're checking the contract for you, as well as adding in clauses and making sure there's no issues. Most importantly, I never submit an offer until my solicitor has approved the contract of sale. Most solicitors will Perform this service for free, especially if you are a repeat customer. This represents another important professional relationship that you have. So let's have a look at the deposit. You can put down a small deposit or the one that is stipulated in the contract, which is usually 10%. As a rule, I always attempt to put down the lowest amount possible. Sometimes this could be as little as $500, although $1,000 to $5,000 is more typical. It is now commonplace for agents and vendors to accept a 5% deposit. So at the very least make it 5% rather than 10% and hold on to your working capital. This amount actually just goes into the trust fund for the real estate agent, unless that's a condition that the vendor puts into the contract. Hence it's not really doing anything for anyone. The reality is that if you default on the deal, you could be liable, so. So just be aware. The exception to this is when I offer to release the deposit to the vendor as part of the terms of the deal. This may be to make the deal more suited to the vendor's needs in return for concessions or things like price or access. Releasing the deposit can be difficult, as if the settlement does not go ahead, the question arises of how you are going to get your money back. Thus, before you offer something in return for something else, work out if you are willing to give it away or not. If you do put the money down though, whilst getting all your checks done in the cooling off period, then be prepared that should you not go ahead, you could get left with a penalty fee. For instance, 0.25% of the purchase price is the penalty in New South Wales, although each state and territory will have its own status on this, so check that out. Which brings me to gazumping. Gazumping is when your offer has been accepted by the vendor, but then before the contracts are exchanged, they agree to sell it to another buyer without giving you a chance to increase your offer. In some states, this is perfectly legal. Until the contract exchange has taken place, the deal is not done. So be sure to have everything in place before submitting an offer and move quickly when it's accepted. So let's talk about engaging a solicitor. Prior to engaging a solicitor, you can draft your own letter, which could have clauses that suit your requirements so you're prepared when you talk to your solicitor. All the clauses that you and your solicitor add to the sales agreement are written in an annex that added to the end of the contract. The wording of conditions may resemble something like this. This contract is conditional upon the the vendor seller warrants that all electrical, plumbing, gas, if applicable appliances are in proper working order at settlement. Be aware that some states and territories have a cooling off period as part of the contractor sale. Most lenders need usually more than the three to five days that this cooling off period usually is. So be prepared for giving yourself enough time to get all the checks done, which may mean one of your conditions is that the cooling off period is extended. Many buyers need more time for settlement. This should be inserted into the contract and also check the penalty charges as well. This is usually negotiated by the agent or the solicitors of the buyer and the vendor. This should be stated and the formula for calculating the rent or the additional interest to be paid should be noted down. That.
