Go in armed with a plan to get your offered accepted.
Are you are currently researching how to make an offer on a property, or perhaps you’ve experienced what it’s like to have already made an offer and missed out…
Either way, I highly recommend you approach house hunting and purchasing with a solid plan.
Having a range of tools and strategies under your belt are your go-to’s.
It will seriously improve your negotiating skills when it comes to buying property.
It can mean you pay below asking price, or simply just get your offer accepted when there are several others to compete with!
The idea of making an offer and negotiating with a real estate agents is super daunting for many people…
If you feel that way, then arming yourself with this knowledge is even more critical!
If you have fallen in love with a beautiful home like this on the Gold Coast, make sure you learn how to make an offer the vendor can’t refuse 🙌. 📷@kalkahomes
What does an ‘offer to buy’ a property look like
Firstly, it is important to know that an offer to buy a home is based on two elements:
- Price you are prepared to pay; and
- Your terms and conditions that come along with your offer.
There is always a big focus on the dollar value when making an offer.
But in certain market conditions, the key is often in the terms and conditions that come along with your offer.
This is certainly the case for the 2022 market across South East Queensland, with a lot of buyers, and not as many homes for sale.
The key ‘terms and conditions’ we have the most success with are:
Finance clause
What is this?
It’s the date you write on your contract of sale for when your home loan /finance needs to be unconditionally approved (meaning the bank will lend you the money).
This date will probably be different for everyone, but on average the ‘normal’ time frame people would use is around 3 to 4 weeks after the date the contract of sale is signed.
This is usually how long it takes for a bank/lender to receive your home loan application and get it approved.
Be aware though, that some lenders will take even longer, perhaps up to 6 weeks or more to unconditionally approve your home loan.
What happens if your finance is not unconditionally approved by your finance date?
A few things can happen ranging from:
- Asking the vendor for an extension – the vendor may or may not approve this, depending on how many other offers to buy they had
- You miss out on the property – but you do get your deposit back.
Settlement date
When you get ownership of the property and can pick up the keys.
This can be anything from 2 weeks up to several weeks or even a year after the date you sign the contract of sale.
You may also like our 12 steps guide to making an offer on an house, which covers where to start with house price research, how to make an offer and managing your counter offer – with ease 👌.
How to come up with valuable terms and conditions.
Start with some research to understand what is prompting the vendor to sell their home.
We believe this approach is one of the keys to making an offer on a house (sometimes below asking price) and having it accepted.
You will need to find out from the real estate agent, the real reason why the vendor is selling.
It can be hard to find out the sellers motivation as the agent may not know or tell you, but it’s important to recognise that often it is not (just) to do with money.
The aim is to put together an offer to buy, that may help resolve a challenge the vendor is facing (other than price), which is often linked to the reason they are selling.
You then use the terms and conditions to ‘optimise’ your offer in line with what is helpful to the vendor, giving you a strong chance of having your offer accepted (which in certain market conditions could be a lower offer).
Below I have shared 5 of the main reasons a vendor decides to sell their property and a terms and conditions strategy to match.
I recommend you approach house hunting with a strategy to win.
Motivation 1: Upsizing / downsizing home
If you are buying from a family who are selling because they are upsizing or down sizing their home, it is very common that they have already found another property to buy.
The vendor is therefore likely to be under pressure to sell quickly and may be feeling pressured or stressed to get offers to buy their home.
Usually the finance for the purchase of the new property is linked to the sale of their current home, through what is known as bridging finance.
‘Terms and conditions’ strategy when making an offer on a house below asking price
When making an offer on a house below asking price, and the vendor is selling as they are upsizing or downsizing their home, consider the following terms and conditions:
- Finance date – an offer to buy with a quick finance period, of 7 to 10 days from the day you sign the contract may be appealing (21 days is considered standard). Certainty of the sale is important to them.
- Settlement date – come up with a settlement date that allows the vendor some time to move out, but also works for you. Settlement is usually two weeks or more from the finance date.
So in this scenario, an offer to buy with a quick finance approval and with a settlement date that fits in with what they need, can be more attractive than a higher priced offer with terms that are not as attractive.
It is important that you check with us first before you determine your finance and settlement dates so we can be confident we can get your home loan approved in time.
Watch this video here to learn more about this strategy.
Video 1: A terms and conditions strategy to use when the vendor is selling as they are buying a bigger or smaller home.
Motivation 2: Relationship breakdown
In the sad scenario when a relationship breaks down, it is common for either partner to have moved out already. Often both are under financial pressure to make their home loan repayments and the person who has moved out (usually the male) may also be paying rent.
Both vendors may be feeling a lot of angst with the relationship, so will want to resolve the sale of the house quickly, so they can move on emotionally as well as financially.
Terms and conditions strategy when making an offer on a house below asking price
When making an offer on a house below asking price, and the vendor is selling due to a relationship breakdown, consider the following terms and conditions:
- Finance date – a shorter finance period is generally appealing (7 to 10 days) as it provides them with certainty and allows them to move on and make other plans.
- Settlement date – I two suggestions:
- If you are flexible as to when you move in, you could offer a settlement period that is longer than the standard 2 weeks after the finance date. This gives them time to find somewhere else to live.
- Alternatively you could settle in the normal time frame, but you can have one of the vendors rent the property back from you for a period of time. Often the mother is still in the home with the children so the extra time could be appreciated to allow her to buy a new home with the money she receives from the settlement and make arrangements to move.
Watch this video here of Victor talking about how you can adjust the terms and conditions of your offer, when the vendor is selling due to a relationship breakdown.
Video 2: Advice on how to structure your offer to buy a home, when the vendor is selling because of a relationship breakdown.
Motivation 3: Financial Stress
When the vendor is selling because they are in financial hardship, it means they have fallen behind on their loan repayments. If this is happening they are under increasing pressure from the bank, receiving more and more letters that demand payment, phone calls for payment are becoming more regular and the penalties and charges are increasing. The vendor will likely be under intense pressure.
Mortgagee in possession is where things have gone one step further. The bank has taken control of the situation and have appointed a representative to sell the home on behalf of the vendor. The bank are fairly well informed of the market value of the home. It could be difficult to negotiate a lower price for the property than what they believe market value is, unless it has sat on the market for a while and they are having problems selling.
Terms and conditions strategy when making an offer on a house below asking price
When making an offer on a house below asking price, when the vendor is selling due to financial hardship, consider the following terms and conditions:
- Finance date – in both scenarios, the vendor/bank will want their money quickly so offer a quick finance period of 7 to 10 days (check with us first to be confident you can get unconditional loan approval in time).
- Settlement date – Often a shorter settlement period will be desirable as well.
Watch this video to learn more about making an offer on a property when the vendor is in financial hardship.
Video 3: If the vendor is selling as they are under financial pressure, they will want a quick finance and settlement date.
Motivation 4: Relocating with their job
There are many types of jobs that require people to move by a certain time, such as school teachers, police, nurses and doctors. Often this can be at the start of the year.
This can put pressure on the vendor to sell by a certain time. Many will have already bought a new home in their new location, or will be wanting to buy quickly to avoid moving into a rental property.
Some employers, especially if it’s the state government, will give the vendor incentives like paying for stamp duty, buying costs, solicitor fees and moving costs.
Terms and conditions strategy when making an offer on a house below asking price
If you can find out the deadline for when the vendor needs to move, then consider the following terms and conditions:
- Finance date – a quick 7 to 10 days after signing the contact of sale;
- Settlement date – as soon as possible after the finance date.
Learn more about this one here.
If you want to get a broader overview, you may also like our 12 steps guide to making an offer on an house.
Video 4: When the vendor is selling as they are moving with the job, often their employer will cover the costs of the move, such as real estate agent fees and stamp duty.
Motivation 5: Deceased estate
Deceased estates can offer a lot of opportunity, as usually there has been an elderly person living there so the house can be run down.
Often there will be 2 or 3 beneficiaries (i.e. the kids) who are waiting on their inheritance and it’s common for them to have ‘mentally’ or ‘actually’ spent the money before the house is sold.
Terms and conditions strategy when making an offer on a house below asking price
When making an offer on a house below asking price, when it is a deceased estate, consider the following terms and conditions:
- Building and pest – the first stumbling block for the family will be the run down state of the home, so a short time period on your building and pest report, of around 7 days, will help alleviate that concern.
- Finance date – a quick finance date of 7 to 10 days will be appealing, given the beneficiaries have been waiting for that inheritance.
- Settlement date – as soon as possible after the finance date.
Also be aware that once you have made your offer, you will need patience as your offer needs to be agreed upon by three parties, not just one.
Watch the video here where I talk in more detail about what is happening with the family involved in a deceased estate.
We have a few more guides that may interest you: learn about terms and conditions in a house contract, get the 12 steps guide to making an offer on an house, or make sure the price you are offering for the house is market value.
Please feel free to contact me if you want to discuss making an offer on a home. Book a 15min strategy call with me.
- Further reading: How to Refinance a Home Loan Guide – +Bonus Quiz
The information contained within this page is general in nature. It serves as a guide only and does not take into account your personal financial needs. Before you act on this information you should seek independent legal and financial advice. Copyright Blackk Mortgage Brokers 2023.
