Are you thinking of making an offer on a property? If you think you’ve found your dream home, congratulations! Making an offer on a property can be incredibly exciting. But before you take the plunge and put in your final offer, we strongly recommend talking to your lawyer about how to make sure the sales contract is fair to you.
After all, buying a house is a huge financial commitment. You want to be absolutely sure you’re making the right choice. This article will show you how to negotiate buying a house the right way with our best tips for negotiating a house purchase.
Checklist Before Making An Offer On A House
Tip For Negotiating A House Purchase #1: Research The Real Estate Market Before You Commit
Before you commit to buying a house, research the value of the property and the local housing market. The median property prices for your suburb can help you decide whether the sale price for a property is reasonable. This can give you some negotiating power and help you avoid overpaying for your new home.
Tip For Negotiating A House Purchase #2: Ask The Right Questions
Ask the real estate agent about the vendor’s motivations for selling. Why? If they need to sell quickly, then you may be able to offer shorter settlement timeframe for a lower purchase
price. This means you’ll have the opportunity to finalise the property sale quicker and move in sooner. If this is your goal, you’ll need to plan ahead to organise your finances and make sure you will have sufficient time to conduct your due diligence enquiries.
Tip For Negotiating A House Purchase #3: Check For Property Damage
Before finalising the purchase price, it’s important to check for structural defects or damage to the property. You can do this by conducting your due diligence investigations before entering into the contract. During the open home, you will be able to take note of any small or large visible damage. Any structural damage identified can be used as a tool for negotiating on the price. Often people will enter into a contract subject to a Building & Pest Inspection, which may allow you to negotiate changes to the purchase price after the contract has been signed. However, please be aware that you must act reasonably under the building and pest inspection clause in the contract and if the purchase price changes as a result of the building and pest inspection, you must inform your Financier, which may mean you have to reapply for your loan.
Tip For Negotiating A House Purchase #4: Understand The Price
Know your budget before you start looking for a home and consider getting a home loan pre-approval. Price is important. You need to know what you want to pay for the home, the deposit (a negotiating item), and the payable balance (usually 5 or 10%). You also need to know whether the deposit is refundable or non-refundable. Finally, you need to know how many days you want to finance. You should speak to your Financier to get guidance on how long they will need to obtain finance approval.
Tip For Negotiating A House Purchase #5: Check The Terms In The Contract
When negotiating the terms of the contract, many buyers are under the misconception that the price is all that they need to negotiate. In reality, you need to make sure to discuss any terms and conditions you want included in the contract, as well as the deposit, before committing to the purchase.
This is where it helps to have a conveyancing lawyer on your side. Talk to them about any conditions you want to be included in the contract. These house offer conditions may include:
- Making an offer on a house subject to finance – This clause gives you time to organise a loan for the property you’re buying. It means that if your loan application is refused, you may be able to end the contract.
- A due diligence clause – A due diligence clause allows you to undertake searches on the property and terminate the contract if the property is not up to standard. Due diligence activities may include surveys, building and pest inspections, body corporate searches, soil tests, or council searches to ensure that the property has been developed in accordance with a Development Approval and that it has had its final certifications.
- Making an offer subject to final certificates being issued for the property – This clause means you do not need to proceed with the sale unless you are satisfied that all final inspections and local authority approvals have been obtained, permitting you to make improvements on the property.
- Making an offer subject to a pool safety certificate being issued at the seller’s cost – If there is a pool at the property and a pool safety certificate has not been issued for the pool, you may wish to place an obligation on the seller to ensure that one is issued prior to settlement at the sellers cost, so that you do not have to worry about this after settlement.
- Making an offer subject to the sale of your current property – This clause means you can make offers to purchase a property subject to the sale of your own property selling.
Ideally, all of these house offer conditions should be taken into account during the negotiations phase, as this gives you more flexibility to negotiate terms before the contract is finalised. It’s important to decide on these terms now because you cannot alter them once you have signed the contract. This way, you won’t be caught out by your real estate agent counter-executing the contract before you are ready.
Tip For Negotiating A House Purchase #6: Decide On Timeframes
Many home buyers are concerned about timeframes. We recommended using your conditions negotiation phase to set clear timeframes.
- Finance timeframes – Talk to your broker to decide how many days you will need for the finance to come through from your bank.
- The length of due diligence – Talk to your conveyancer about how long it will take for the searches to come back. You’ll need to know how many days you’ll need to complete building and pest inspections, council searches and body corporate searches. For this, it’s best to consult your conveyancing lawyer.
Tip For Negotiating A House Purchase #7: Understand Restrictions On Negotiation
It’s important to remember that you cannot negotiate certain contracts, such as auction contracts. When the hammer falls, you are stuck with whatever is in that contract, so make
sure you carry out your due diligence on the Property prior to attending at the auction and
have your conveyancing solicitor review the contract so they can point out any problems with
Tip For Negotiating A House Purchase #8: Check Off The Plan Contracts
For off-the-plan contracts, it’s worth checking with the developer or developer’s agent to understand if the terms are negotiable. Talk to your agent first.
Off-the-Plan contracts are generally very heavily weighted in favour of the developer. Accordingly, even if the Agent says the contract is not negotiable, seek legal advice from a conveyancing lawyer on the contract before you execute it. Frequently, developers engage a team of lawyers to make the contract as beneficial to them as possible. Often, this means that they can recover costs from you at settlement that you may not be aware of, such as land tax. Timeframes for them to have the lot ready for settlement can also become drawn out and you may have limited rights if this occurs.
Often, sellers and real estate agents will require you to put your offer on a contract or put if forward by way of signing it. Avoid a common pitfall made by home buyers and make sure to negotiate any conditions you need before you sign the contract. Otherwise, when the seller counter-executes the contract, the terms you would like to negotiate may not be included.
This is why we strongly recommend having your contract reviewed by a legal professional before you sign it and submit it to the Seller or the Agent. At Brisbane Conveyancing, we offer a free review for a standard REIQ contract. Simply email through a copy of your contract and our team will conduct a free review.
Making an offer on a property can be daunting but the team at Brisbane Conveyancing are happy to help guide you through the process. Need help with the conveyancing or just want to talk it through?
Contact Queensland’s conveyancing experts, Brisbane Conveyancing, on 07 3077 6566.