How to make an offer - private treaty

Most real estate agents will list the price of a property at around 5-10% higher than the figure the vendor has in mind. In theory, you should have an educated guess at the price the vendor wants, and then pitch your own offer at some point below that.

Some other tips to consider:

  • If you have time, it may be worth getting a professional valuer to value the property. Check with your chosen lender to ensure that the valuer you use is one who is also acceptable to the lender.
  • When you've arrived at a figure, put your offer in writing to the agent. Specify how much you are willing to pay, and any conditions that you want to attach to the offer—such as repairs required, the deposit you will put down, and perhaps a timeframe for moving in.
  • The real-estate agent is then obliged to pass this offer on to the vendor. You'll just need to sit back and await a response—at which point, the negotiations will probably begin.

Example of how to make an offer

Please see below an example of how you might consider wording your offer. Important to note that the actual wording should be determined by your individual circumstances and the below treated merely as a guide.

Dear {Real Estate Agent}

Further to our inspection yesterday and review of the contract we would like to place a formal offer of AUD $$$$ for the vendor's consideration on {property address}.

This offer is subject to:

1. Legal review of the contract and strata report;
2. Property valuation; and
3. Any other requirements as necessary.

As we are in a position to move quickly, we are also happy to discuss earlier settlement timelines with the vendor.
Should you have any queries or feedback please contact me on ph xxxxx or email xxxxxx

Regards, {Name}

How to handle an auction

Buying a property is an emotional process, and it's best to keep those emotions under control at all times. This is hardest in the pressure-cooker environment of an auction situation.

If you're competing against another buyer who has their heart set on the property, this can drive prices up to an extraordinary level. On the other hand, it's possible to pick up a great bargain. It's this element of risk and uncertainty, plus the theatrical aspect of the auction process, that adds to the emotional overload.

Here are some tips you could consider if you're likely to be involved in an auction:

  • Attempt to purchase the property before it goes to auction. That way, you can use your knowledge of the market and the vendor's circumstances to swing the process in your favour. After all, the vendor will be nervous before the auction too, and may be tempted to accept a reasonable offer and avoid the uncertainty of the auction process. (Tip: the only downside to this approach is that if the auction goes ahead, you've indicated how much you're prepared to pay).
  • Go to a couple of auctions on properties that you're not intending to buy. Observe the process and the way the auctioneer runs the show. Take note of the strategies employed by those who are successful.
  • Before the auction, get your solicitor to check the contract and strata report. Check with your lender that you're covered and make sure you've received pre-approval on lender letterhead before the auction.
  • Make sure you've had the necessary inspections done on the property, because when the hammer falls, the winning bidder is legally obliged to purchase the property.
  • Check the terms and conditions that come with the property sale. If you want to change these, make a request. You don't need to accept the terms laid out, and equally, the vendor doesn't need to accept the changes you're requesting. But it is always worth enquiring.

Before the big day, in your mind, set the absolute maximum price you're prepared to pay—and stick to it in the heat of the auction. Winning bids are usually just over a round figure, so bear that in mind. It's the little bit extra that knocks the opposing bidder out of the game. TIP: Deposits required on the spot are usually 5-10% of the purchase price but need to be negotiated before auction. It's a good idea to have the deposit made out to 5% or 10% of your maximum price to ensure you don't go over your limit during the bidding.

If you think that this sounds like a stressful process for both the buyer and the seller, you're right. And if you're not sure of your abilities to handle that stress, consider getting a Buyer's Agent to bid on your behalf and advise you in the run-up to the auction.

How to handle a private sale (no agents)

Some sellers prefer not to use a real-estate agent, and will attempt to sell their property themselves. They may have had a bad experience with an agent in the past, or they're unwilling to pay an agent's commission.

Whatever the reason, you need to moderate your approach as a buyer: it is easier to negotiate with a dispassionate intermediary such as agent than with a seller who may be emotionally involved in the sale. The seller may also have a more inflated view of the worth of the property, and may be reluctant to budge on price.

There are no hard and fast rules here, except to use more tact and to always explain your reasoning very clearly when negotiating price.

You should also work closely with a lawyer to ensure that all documentation is above board, and correct legal processes are being followed. (In sales handled by an estate agent, the agent will keep an eye on this on behalf of the seller.)

Continue to information about the next steps to buying your chosen property.