Making an offer on a House Below Asking Price [2021 update]
Photo by todd kent
Originally Posted On: Making an offer on a house below asking [Buying a Home 2021] (huntergalloway.com.au)
Today I’m going to show you how to make an offer on a house (FAST).
The tips in this post helped me, and 619 others with going from renting to buying our own home.
And today I’m going to show you the exact tips we used to make an offer on a house (below the asking price)!
1. Check out recent sales
You can go down a rabbit hole trying to research other properties that have recently sold…
…There are literally hundreds of great free property research tools out there.
But at the end of the day, only 3 things matter when finding recent sales:
- The property being compared should be within 1 km of the property you want to buy
- It was sold within the last six months
- It is similar in nature to the property you wish to value (i.e. same bedrooms, bathrooms, block size)
To check out the recent sales on RealEstate you need to follow these steps to either find similar sales…
(And spot the odd ones out)
- Step 1. From the front page enter the suburb you are looking to buy, the type of property and filter for your target price range.
- Step 2. Sort from Newest to Oldest: This will help you find sales that have happened in the past 6 months which the banks will consider similar.
- Step 3. Make a list of properties, the address, sale date and bedrooms.
Step 4. Review your list of properties to do some further comparison.
119 Waterworks Road Ashgrove
78 Canberra Drive Ashgrove
16 Brisbane Street Ashgrove
29 Lindsay Street Ashgrove
100 Ashgrove Ave Ashgrove
To further make sure that you are doing the correct comparison, keep the following in mind:
- Quality – The quality of both properties should be the same if you want to make a fair comparison
- Rooms – The sold property should contain the same number of bedrooms, garage, bathrooms, etc.
- Land Size – Find out if the land size of a sold property is similar to that of the one you wish to buy
- Location – If the location of the property is at the same distance from amenities like shopping malls or the transportation facilities, and if the streets look the same.
If you were buying a 3 bedroom house you would remove any of the recent sales that have 1, or 2 bedrooms as they wouldn’t be considered comparable.
In other words, the sales at 78 Canberra Drive and 16 Brisbane Street Ashgrove won’t count when compared to a 3 bedroom home in the same suburb because they both have 2 or fewer bedrooms.
Based on the other sales you could expect to pay between $722,000 and $765,000 for a 3 bedroom home in Ashgrove.
Keeping these factors in consideration will help you compute the right price and ensure that you are making the right offer.
2. Ask the agent lots of questions
Here’s the deal:
The Real Estate agent’s top priority is to sell the property quickly for the highest price possible.
In other words, the agent doesn’t get paid by the hour so in their eyes a quick sale is a good sale.
Asking the Real Estate agent lots of questions can help you understand the seller’s motivations, and know how to make your offer stand out in a multiple offer situation.
To get an understanding of the seller’s motivation ask the following questions:
Why does a Seller want to Sell the House?
- This is the first question you need to find the answer to. There can be a number of reasons why a seller wants to sell the property. They might be an investor who bought the property for resale purposes, or they may be under pressure to sell the house. If it is the latter, you could be in a better position to negotiate the price.
How Long Has the Property been on the Market?
- This is another crucial question you need the answer to if you want to make the right offer. If the property is listed for over 6 to 10 weeks, there is a good chance that you can make a lower offer. Besides, properties that remain in the market for over 6 months, usually are not priced realistically.
- Sometimes the sellers place an unrealistic price expectation and the value placed on it is higher than the market value, but they refuse to accept a low offer, which then makes it overpriced.
3. Complete your inspection checklist
There is no substitute for physical inspection when it comes to purchasing a home.
It allows you to see other attributes that you would have otherwise ignored while searching for a property, such as its locality.
Whenever you plan to visit a property, plan a building and pest inspection before making a purchase as it will disclose the problems beforehand that would otherwise be costly to fix
4. Get a second set of eyes on the home
2 pairs of eyes are better than 1 when it comes to property.
You go to the 4th property inspection on a Saturday.
Finally, you find the right place, in the right street at the right price.
You get swept up in the excitement and are ready to sign the contract then and there…
And I can guarantee you will miss details about the property…even if you are following the Property Inspection Checklist.
The second set of eyes will prevent this.
When I have bought I’ll always bring a friend or someone from my family to provide a second set of eyes and give a third party opinion.
As much as you might love a home, you have to remember that one day you are going to want to sell.
And really unique in your eyes, could be really ghastly for someone else.
5. Grab a copy of the contract (and get the conditions right)
The first thing you should do is get the conditions right.
This is a very crucial step as it enables you to be well prepared before making an offer on the property.
Price is the first thing you need to consider. Decide on what you are willing to pay for a house and how much deposit can you invest in the beginning?
By determining the price you are willing to offer, you will set the base for the next step. It helps you identify the type of properties you should be looking for and the areas where you should focus.
Then comes the clauses of a contract. You should know the clauses you want to include in an agreement, including the ones related to pest control, building inspection, financial clause, and more.
Bear in mind that the more attractive your offer is, the higher are the chances that a vendor will accept it. However, just because you are offering the highest price doesn’t mean the seller will accept it either.
There are a number of other things a seller considers when selling a property…
For example, they prefer buyers who are willing to pay in cash or someone who is willing to offer a long-term settlement because they don’t want to move out for a certain period of time.
Talk to your real estate agent about what a seller is expecting, as it will help you make a more attractive offer.
6. Find out how fast your loan can be approved
The conditions of your contract can make or break your offer.
Having a great mortgage broker on your team can help reduce the days it takes to get your finance approved.
Meaning your contract is much more competitive than the competition.
Having a good broker like Hunter Galloway can help you get your loan approved in under 14 days.
7. Making an offer on a house below asking price
Palms are sweaty mum’s spaghetti…
It’s show time, you’re ready to make an offer but thinking about making a low ball offer first.
(In other words, you are thinking about making an offer for a fair bit less than the property is worth)
This can work but really will depend on the current property market cycle.
For example, if you are buying a house in Brisbane in 2021 we are currently at the start of a market recovery. This means there are more buyers in the market, and prices are increasing – and unless the property you are buying doesn’t have many other buyers, its fairly unlikely your low ball offer will get accepted.
On the other hand, if you are in Sydney or Newcastle in a declining market, the market is cooling off, it is taking much more time for properties to sell and you are much more likely to have your low offer accepted.
What is considered a lowball offer?
A low-ball offer is a real estate term meaning a lower that would be way below the sellers asking price, or what they were reasonably expecting to sell the property for based in the current market.
Your offer is really going to depend on the research you did in the steps above.
If you think the sellers are asking way more than you think its worth, you could put an offer in to feel them out.
How Low is a Low Offer?
The average vendor discount (the difference between the original asking price of a property for sale and the eventual sale price) will depend on the suburb and can range from between 5% to 10%.
(Put another way, there is nothing wrong with offering between 5% to 10% below the asking price)
But I have seen people get as much as a 25% discount on less desirable properties, in a slow market.
Sometimes a lower price, with sharper finance terms (for example 7 days for finance) can help you seal the deal…
8. Put an offer in writing
You should always put your offer in writing to make it more effective.
In Queensland, you are required to present all the contracts in writing.
If you do not make an offer in writing, it may still get accepted, but there is no guarantee that the seller will honour it.
To be sure that the offer is processed, put it in writing.
Real estate agents will draw up the offer, but they represent the sellers.
Therefore, hire a conveyancer who can check your offer before you send it out to a seller.
9. Think about your counter offer
Devise and follow the right negotiation strategy.
(Don’t worry, you don’t need to read Donald Trump’s The Art of the Deal to get this right)
If possible instead of making the offer first, let the seller come up with the price.
This will give you a clear idea of what the seller is expecting and how much you can negotiate.
For example, if you make an offer to purchase the house at $600,000 when the advertised price of a house is $650,000 and the seller was willing to sell it for $550,000, you will end up losing $50,000 that could have been saved had you not initiated the offer.
Keep the Counter Offer into Consideration
It is quite likely that after you present the offer through your conveyancer or real estate agent, the seller might give a counter offer.
In that case, take their offer into consideration.
Figure out if you want to accept the offer or want to make another offer to the seller. Be very careful with the timing of this though.
Try not to delay your decision-making process, as the seller might sell the property to someone else.
10. Ask about the cooling-off period
In most cases across Australia, you get a cooling off period after you have signed the contract.
In other words, you get a few days to cancel the contract if you change your mind.
The big BUT to this is if you buy a property at auction…
There is NO cooling off period when you buy at auction.
As the Real Estate Agent or your Conveyancer if you receive a cooling off period, because in some situations if you pull out from the sale you can lose your deposit – unless you have subject to finance clauses in the contract.
- Victoria Contact of Sale
The Instrument’s Act 1958 states that unless you honour a contract of sales in full, a verbal agreement is not binding.
Before signing a contract of sale, the seller is bound to provide the potential purchase with the seller’s statement. Both parties sign each contract’s copy and exchange it through a real estate agent. The cooling off period in Victoria is 3 days.
- New South Wales Contact of Sale
In New South Wales and Sydney, you cannot sell a residential property without signing a contract of sale. Many changes have occurred in these states. For example, a seller of strata scheme or a single freehold is also required to provide a valid non-compliance certificate, an occupation certificate, and a valid compliance certificate.
Moreover, the vendor and purchase are under no obligation to honour the contract until they exchange signed copies. These copies can be exchanged in a face to face meeting or via mail. The cooling off period in New South Wales is 5 days.
- Queensland Property Contact of Sale
In Queensland, the cooling off period is 5 days and the following information should be included in the contract for it to be valid: If the contract is terminated by the purchaser during a statutory cooling-off phase, they will be bound to pay a penalty of 0.25% of the purchase price. Therefore, it is advised that a purchaser should do a property valuation independently and seek legal advice regarding cooling-off rights and the contract before signing a contract.
In these states, the contract is signed by the buyer first, and the seller only signs it if he accepts the offer. It becomes binding only after the buyer receives an acceptance notification. It is important to note that in Queensland, only lawyers can act as conveyancers.
- South Australia Contact of Sale
In South Australia, a seller is bound to provide the buyer with a Form 1 Disclosure statement before signing the contract. After the contract is signed by both parties, they are bound by its terms and conditions. The cooling off period in South Australia is 2 days.
11. What to do when your offer has been accepted
You got the phone call from the Real Estate agent to let you know your offer has been accepted!
…But what now?
From here you just need to follow the simple 3 steps in the home buying process:
- 1. Take out property insurance
- 2. Get in touch with your mortgage broker to get your loan approved
- 3. Engage a solicitor or conveyancer
In Queensland when you are buying a house you are liable for insurance from 5 pm of signing the contract of sale.
So you need to take out home insurance to get protected.
It’s also at this point you need to get in touch with your Mortgage Broker to get the home loan approval rolling.
They can help you manage the process now, and make sure you secure that shiny new home!
12. Requesting a finance extension
As much as it might seem like a MASSIVE deal for your finance to take longer than expected to get approved.
Tom Astill, from Astills Lawyers, believes it is a very common occurrence for buyers in Brisbane.
“We are seeing finance extensions being requested in over 50% of our purchases at the moment”, Tom said.
“The banks are taking longer, which the vendors are happy to accommodate and generally are fine with providing an extension to finance.”
In other words:
It’s very common to request an extension on your finance clause so don’t worry!
All you need to do is send an email to your conveyancer asking for an extension which they will request from the property seller.
Are there any penalties for requesting a finance extension?
No there is no penalty interest or other issues when requesting a finance extension.
Worst case scenario if the seller rejects your finance extension request, under standard REIQ contract terms as long as the termination is lawful your deposit will be fully refunded.
Either way, speaking with your solicitor and they can negotiate an extension for your finance due date.
13. Start Planning the settlement
In Queensland, when you signed your contract of sale you specified your settlement date.
This is usually 30 days from the contract of sale.
For example, if your contract of sale was dated 1st November then the settlement date will be 1st December.
If the 1st of December falls on a weekend then settlement will fall over the next available business day.
In other words:
If settlement falls due on a Saturday, then the following Monday will be the settlement date!
Also, book a time for your pre-settlement inspection
You are allowed one final inspection before settlement to check out your new home.
Make sure there haven’t been any changes made since you signed the contract of sale, or rubbish dumped in the backyard.
A few things to look out for are:
- Any major damage to the property
- Double check the inclusions and exclusions like dryer or dishwasher
- Make sure it is clean and tidy
- There hasn’t been any rubbish dumped in the backyard
- See if there are any other special conditions
If you have an issue, you can let your conveyancer know as soon as possible to get the property sellers to address any issues.
14. Settling into your new home
Settlement of your home will usually happen after 2 pm on the day of settlement.
But what happens after you pick up the keys?
To help you settle in remember to:
- Begin with the cupboards
- Put the kids first
- Get the TV plugged in and on
- Try to get into your routine
You are finally home!
Bonus: Is a 21 day finance clause good, or bad?
If you are buying a home in Queensland, the finance clause includes the total time you have as as buyer to get your home loan approved after signing the house contract.
When you buy a home in Queensland, you can sign a contract subject to certain conditions subject to:
- You being approved for finance
- A satisfactory building and pest inspection
- If you can sell an existing property
It’s important to double check these conditions are in your contract before you sign, otherwise you can be bound to the contract. As the buyer this is your responsibility.
But the one question we get asked all the time:
Is a 21 day finance clause good?
The answer? NO.
In a competitive property market like Brisbane 21 days is WAYYY TOO LONG and you could miss out on your property.
With our clients, we suggest a 14 day finance clause or speak with your mortgage broker to confirm they can put you in a position to make an offer subject to 7 days for finance.
This makes your offer much more competitive than others who offer 21 day finance clauses!
If you need a hand with getting finance or have questions on the home buying process speak with our team and schedule a Home Buying Readiness Assessment Call with one of our Mortgage Brokers.
Talk to a team of Home Loan Experts
The first thing you can do is speak with an Expert Mortgage Broker to discuss your situation and options.
They will take the time to understand why your home loan was declined, and find other banks and lenders that will look at your situation fairly.
Call us on 1300 088 065 or complete a free assessment to speak with one of our expert mortgage brokers.
Further reading for Home Buyers…
- For our comprehensive guide for First Home Buyers, check out this page here.
- Looking at getting a loan, check out our Complete First Home Buyers guide.
- And don’t forget the costs of buying which we covered in detail here.
- Making an Offer on a House – Queensland Office Of State Revenue
- Making an Offer – NSW Office of State Revenue
Ready to take the next step toward buying? We’re happy to help. Schedule a call today with a Home Loan Expert from Hunter Galloway, the home of home buyers.