Understanding the best way to make an offer on a property can be the difference between purchasing your dream home and missing out, particularly within Sydney’s competitive property market. Preparation for buying your next property is more important than ever due to the increasing of demand for houses, fluctuating property prices, and interest rate rises. The following guide can assist you in successfully purchasing your next property, whether you’re adding to your investment portfolio or buying your first home, the steps will ensure that you have the tools you need to make an offer on a property.
Steps for Buying Your Next Property
There can be many steps involved in buying a house or other type of property. Here are some of the key steps you may want to consider.
Review the recent sales in the property market
Comparing your desired property to other properties in its local market helps you to determine realistic prices and make an informed decision about what you are willing to offer to purchase the property. Looking at the prices and features of recent property sales in the area will help you to make this informed decision.
Engage a Property Solicitor or Licensed Conveyancer
Property lawyers and Conveyancers can help to ensure that your property purchase runs as smoothly as possible by reviewing contract documentation, providing you with advice, and overseeing your property purchase. Engaging a conveyancing lawyer is a critical step in the offer making process, as it is important to review the relevant paperwork to understand more about the property that you are planning to purchase.
Review the property paperwork
According to section 63 of the Property and Stock Agents Act 2002 (NSW), a real estate agent must not offer residential property for sale unless a copy of the proposed contract for sale of the land, including any prescribed documents, is available.
This contract should be reviewed carefully and thoroughly by your conveyancing lawyer to ensure that you have a complete understanding of the property you intend to purchase, and anything that might affect your use and enjoyment of the property. This document will usually contain key information such as:
A copy of the title deeds, which confirms details of the current ownership of the property, as well as other things affecting the land such as details of easements, covenants, or details of strata or community schemes.
A zoning certificate or section 10.7 certificate which lays out the legal requirements for how the land may be used. For example, whether there are any restrictions on future development on the property, or whether it is affected by land contamination.
A drainage diagram which sets out sewer lines and which may influence how the property can be used.
Strata information which is relevant to understanding the plan of the building and the rules (by-laws) that govern it.
In determining whether these contractual disclosures will affect you, it is important to seek expert guidance from a Property Solicitor or Licensed Conveyancer.
Organise a Building and Pest Inspection
If you are buying a house, this is a critical step. It is important to check that there are no building related concerns that may affect your use of the property. This could include things such as structural damage, water damage, or pest issues such as termites. These inspections may help you to avoid significant future costs.
If you are buying a home in a strata scheme, it is important to also check the records of the strata scheme to see whether there are any issues within the building. This could be things such as structural or maintenance issues in the building, disputes between owners, financial issues affecting the strata scheme, and many other things. Typically, a strata inspector is engaged who will inspect the building records and prepare a report, which can then be reviewed by your conveyancing lawyer.
The Offer and Acceptance Process
Once you have carried out your due diligence on the property, you should have a good understanding of the condition of the property, and what it is worth. The next step is to make an offer. While offers can be made verbally, offers that are written (in the form of the contract) are generally preferred, as they are often taken more seriously, provide a paper trail, and can be clearer which reduces the chance of misinterpretation.
How to make an offer on a property
The offer itself will typically be in writing, addressed to the selling agent, and contain information such as:
The price being offered for the property (including details of which property you are interested in, since real estate agents are often selling multiple properties at any one time)
Your deposit amount - this is usually 10% in New South Wales, but can be subject to negotiation.
The settlement period – this is usually 42 days in New South Wales, but can be subject to negotiation.
Whether or not a cooling off period will apply to the sale. Typically residential property sales will be subject to a 5 business day cooling off period unless sold at auction or on the day of an auction.
Any other terms or conditions, such as ‘the offer is subject to finance’ or ‘subject to my lawyers reviewing the contract’.
What happens once you’ve made your offer?
Once submitted, your offer can be:
Accepted – This may then lead to the signing and exchanging of formal contracts.
Rejected – You may then choose to increase or change your offer, or walk away from the property if the seller wants a price that is too high.
Countered – The seller may seek to negotiate your offer with you and propose a counter offer.
Withdrawn – You can withdraw the offer at any time before contracts are exchanged.
Even if your offer has been accepted it is usually not legally binding, meaning that vendors may still accept offers which are higher. Typically an offer will not become legally binding until contracts have been signed, exchanged, and a deposit paid.
To ensure that this process runs efficiently, it is important that your contract has been reviewed by a property lawyer or conveyancer, and you have the necessary funds ready to pay the deposit without delay.
Other considerations when making an offer to purchase property
Understanding your finances
Understanding your financial position includes not only determining what you are willing to offer, but also your absolute limit. Property seaches and inspections, stamp duty, legal fees, and renovations or repairs are potential additional costs which may have not been already taken into consideration when determining an offer price. Establishing these parameters early helps avoid future financial concerns which may arise.
Know the common offer terms and their value
The terms attached to your offer play a significant role in its success. A shorter settlement period, fewer conditions, or flexibility around the vendor’s timeline can make your offer more attractive, even if it is not as high as someone else’s offer. For example, a vendor might need a quick sale due to financial stress, illness, or divorce, and a quick settlement might be more important to them (and might save them more money) than a slightly higher sale price.
Evaluate the property's long-term suitability
Consider whether the property suits your lifestyle and future needs. Think about whether it has the necessary elements that you require such as location, transport, nearby schools, or potential return on investment. A thorough assessment of these factors should always be taken into consideration.
Consider tax obligations
Stamp duty, purchaser surcharge duty, land tax, surcharge land tax, capital gains tax, and goods and services tax can all affect property transactions. It’s important to get the right tax advice up front to avoid costly mistakes.
Consider getting professional help on your offer
Property lawyers and conveyancers usually do not get involved in the offer making process, and usually only get involved once the terms have been agreed between the parties in order to prepare the formal documentation and conduct further due diligence, however if you need professional help to make an offer, you might consider engaging a buyer’s agent to negotiate the sale price and make an offer on your behalf.
Get legal advice early in the process
By taking these various factors carefully into consideration and approaching the purchase with preparation and a deepened understanding, you’ll place yourself in a much stronger and informed position to make an offer which is reasonable and desired by both parties. By getting your conveyancing lawyer involved early in the process, they can help to guide you through some of these steps and ensure that you maxmise your chances of successfully negotiating a property purchase.
