6 tips for submitting a prior offer
Springtime is arguably the most active and competitive period in the real estate calendar in Australian capital cities as buyers and sellers vie for share of voice in the market.
The level of competition inevitably leads to disappointment for some buyers, as the number of would-be buyers far outweighs the number of properties on offer. So, how do you get an edge in a competitive market?
Some argue the merits of submitting a prior offer. While not always the best course of action it can sometimes pay off. So what’s the trick to making a prior offer? Here’s six top tips to follow:
Tip 1: While the auction process can be daunting for some, it’s also transparent, which means you can accurately determine interest in the property and whether you’re paying the right amount. For this reason, in most circumstances it’s favourable to proceed with the auction process, rather than making a prior offer, to avoid overpaying and showing your hand to the agent should the auction proceed anyway.
Tip 2: Be aware a prior offer may put you at a disadvantage – placing you at the whim of the selling agent, which could see you pay more than the property is actually worth.
If an agent is amenable to a prior offer, it may indicate you’re the only buyer at that price level. A prior offer can reveal your budget to the selling agent, which will be used unfavourably against you and other buyers to maximise the sale price, whether via private negotiation or at public auction.
Tip 3: When submitting a prior offer, ensure you have a solid understanding of market values, remembering price doesn’t necessarily equal value. And, don’t take the listing price as gospel. It’s a real shot to the heart, and the ego, to find out you’ve overpaid for a property because you failed to do your research, or got caught up in the emotion of the purchase.
But, don’t offer a low ball offer either, as it will likely be rejected. Research is the key to negotiating a price that is fair for both you and the seller. Compare the property with recent sales of similar properties, or, if it’s particularly unique or unusual, obtain a valuation for greater certainty.
Tip 4: If submitting a prior offer, ensure it’s not open-ended. The offer should be subject to a window period, usually 48 hours, to allow the vendor time to think it over. But, not too much time that the agent can use it as leverage with other potential purchasers.
Tip 5: The timing of a prior offer is crucial. If it’s a week or even days before an auction, it’s less likely to be considered by the vendor unless they’ve had virtually no expression of interest from other buyers. If you’re considering making a prior offer, do so as early as possible – that is, several weeks before the auction, saving you and the vendor the stress of an auction campaign.
Tip 6: While the sale price is important, it’s not always the most important factor for a vendor. Consider what conditions of sale will make your offer more appealing to the seller i.e. an unconditional offer, a higher deposit or a shorter or longer settlement period, depending on the seller’s requirements. If your purchase is for investment purposes, you could also rent the property back to the current owner in need to sweeten the deal.
While you may only buy a property once or twice in your life, you’re dealing with seasoned professional negotiators who buy and sell property on behalf of others every weekend. Therefore, if you choose not to engage a professional such as a buyers advocate or valuer, knowing the tips and tricks used by agents will help you hold your ground, and submit a winning offer.
Follow Greville Pabst on Twitter @grevillep