Making A Written Offer!

G'Day Everyone!

well besides the normal building & pest clauses, make sure you get 21 days finance. 14 days is often not enough.

I always write deposit of $1000, as long as its enough to cover the 0.25% 5 day cooling off period fee. Never pay it up front, say you will pay 3 days after acceptance (or 14 days Ive done a few times)

Have a time limit on them accepting the offer, as they can play you off against other offers for weeks.

Go in $2k below what you actually want to pay. Tell the agent this is a first and final offer. If they dont accept, you will move on to the next deal.

www.posigear.com.au
Positive Geared Share Investing

I'd also add subject to satisfactory review by the Solicitor (you never know what the solicitor may not like, even on a std sales contract).

I am opinionated. Take me at face value, read between the lines.

http://www.reao.com.au/forum/entry.php?80-How-bright-is-your-agent

agents like you to pay 10% deposit, as this covers their commission. tell em to get bent.

www.posigear.com.au
Positive Geared Share Investing

Don't forget an offer can be binding if accepted. be careful.

Terryw

Terry, Crashy and Scott !!

Thanks for your time and ideas...its greatly appreciated and absorbed quickly too.

I am led to believe you should make a written offer, otherwise the vendor won't take you seriously. I don't agree. Why can't you make verbal offers? Buying a property should be no different to the bargaining you do when buying a car or TV, for example. Making written offers appears a somewhat time-wasting exercise, especially if they want you to dump a 10% deposit everytime - very restrictive.

My thinking is I might have viewed a few potential properties and would be prepared to buy any of them, depending on who is prepared to do the best deal. Could it be they want a written offer, so they can "handcuff" you to their property so you don't show interest in others at the same time?

Years ago when I was looking to buy a new car, I remember a salesman telling me I wasn't showing that I was serious enough about it, based on what I said. He felt I was just "kicking the tyres", so to speak, and maybe even wasting his time. I didn't appreciate him telling me this. So I quickly thought, I don't need this clown. I simply agreed with what he said and left. The very next day I bought the exact same car from another dealership! He lost his next sale just like that.

The point is vendors/agents should take all offers seriously (verbal or otherwise) because they might turn away the most likely person to buy their property.

Some agents will in fact take verbal offers on property, however good agents have more than likely learnt that it is not in the best interest of the Seller to do so.  Most agents have learnt along the way that verbal offers that are accepted are more often than not never converted to contracts.   The reason is that the Buyer generally thinks that if the offer is accepted, they have offered too much. 

The act of putting the offer in contract form does in fact increase the chances of the offer being taken seriously, but it must also be taken in contex with the conditions that are included.   When buying a property it would be worth your while to consider what you would accept if the property was yours.   For instance, if the property was listed at a reasonable price of $400,000 would you go in with an offer of $300,000 subject to finance 21 days, subject to Building and Pest 21 days, subject to you changing your mind within 21 days and on a 90 day settlement with $1000.00 deposit.   My guess is that neither the Seller nor tha Agent  is going to treat this offer with any seriousness.

On the issue of low deposits, there is nothing in law to say how much a deposit should be (except at Auctions where it is specified) and I agree that when push comes to shove, I have taken low deposits (funnily enough, these contracts are usually the ones we have the most trouble with at settlement).   The thing to keep in mind is that if I have two or more offers on a property, I will advise the Seller to accept the one with the largets deposit given that price and all other conditions are similar.   So the moral is doen't get to cocky or it could cost you.    Another interesting point here is that this low deposit syndrome only comes from Investors who are borrowing cost plus in order to purchase the property.   Owner occupiers understand that the deposit forms part of the purchase price and are more often than not happy to show commitment by giving 10% deposit.

Jon

www.BrisbaneUnits.com

Thanks for the insight, Jon. Let's say a verbal offer is made, accepted by the vendor and there is no follow through to sign the contract. What is the loss to the vendor.? Nothing, as far as I can see. I can certainly understand how a signed contract with a significant deposit would be seen in a better light. However, I still think that all offers, verbal or written, should be taken seriously. This would be especially so in a slow market where a property has been on the market for a while.

My understanding is in most states you have a short cooling off period after an offer has been accepted. Therefore, even with the written offer, you always have that escape anyway. Have I missed something?

Hi Wewaz,

Life is a two way street, unfortunately most people can only see the way they are travelling and are only interested in their own benefits.    Your question - Let's say a verbal offer is made, accepted by the vendor and there is no follow through to sign the contract. What is the loss to the vendor.? is a good one, and as you rightly say, there is little loss to the Seller except perhaps dissapointment and maybe a little time.   I also agree that every offer should be taken seriously and from my point of view they are - but in writing.
It is not hard to believe that the major problem facing Sales People, Tradies, Property Managers, Lawyers and indeed anyone who is offering a service today is a lack of trust from the end user, when it comes to property transactions that lack of trust comes from both sides (the Buyer and the Seller).   If an agent continues to give verbal offers to a Seller (and lets understand that most verbal offers are going to be low ones) the suspicion from the Sellers point of view is that the agent is only giving low offers in order to get the price of their property down.   They can't see the Seller, they only hear the verbal where as if I put a written offer in front of them it becomes more transparent.  I hope this helps to clarify why written is best.

As to your point in relation to the Statutory 5 day cooling off period, it is interesting to note that the .25% of the selling price termination penalty for using this condition was placed by the Government in order to stop unscrupulous Buyers from running around and placing offers on multiple properties and then later making up their minds as to which one they wanted to keep.

Jon

www.BrisbaneUnits.com

Hi Radiant Spark and others,

Hmmm . My experience is that I have never formally made a written offer but I can see that there is definitely a place for it especially if you have been asked to do it that way.  I am currently purchasing my 4th property in the past 5 yrs and have always made verbal offers. I would imagine that an experienced agent would be able to identify a serious purchaser. I have got to know the agents in my area quite well and they seem to be clued up on these matters. One thing that I will do is get the agent to write down the offer and conditions before presenting it to the vendor. This strengthens the committment on both sides but falls short of being an official written offer.

ie:       300k ;  5k deposit ;  subject to X, Y, Z,  finance clause of 14 days, 60 day settlement etc, etc.

And just remember Radiant Spark. The bargain of the century comes up every week! ( so they say ) So don't get too hung up on your first submitted offer being accepted.

Best wishes in your investment future! 

Ian

Hi,
when I have been the vendor in the past I would only look at a written offer... I had an agent once that spoke to me about  a verbal offer he had for me that day... I told him to write it down  with the buyer in the form of an offer before I would consider looking at it..if the buyer isn't prepared to even do that he really cannot be taken too seriously.
I certainly wouldn't start to negotiate verbally (unless there were specific criteria ie, if buyer is on an oil rig or mine site & cannot readily access faxes etc) 
I feel if someone really wants to buy a house they would take 30 minutes out to write it down with the agent.... it is not just the dollar amount I may want to view... I need to view the whole (potentially) contract document, term's, conditions etc before I agree to anything.

if they are not prepared to make a written offer... I wouldn't take them seriously. I know & they know, that there is 5 day cooling off so there is no reason for them to not write it down.

"A verbal offer is not worth the paper it's not written on"

Mackar

I agree with Mackar

I would never even consider negotiating with a purchaser who wasn't even serious enough to put their offer in writing. 

Once I have received a written offer I consider the potential purchaser a serious purchaser.  I will then negotiate with that person.  If I was to negotiate with every purchaser who even made a verbal offer then the property would not be available for other potential purchasers. 

If I accept a verbal offer from a purchaser I then have to wait a couple of weeks for contracts to be drawn up etc.  If the offer is not a genuine one then the property is off the market for at least a couple of weeks until everyone wakes up to the fact that the offer was not a serious offer.  Then when I put the property back on the market because a contract never materialises other potential purchasers see that it has been off the market and come back on and assume that it is because the contract has fallen through because of finance (I am asking too much) or an inspection.  That makes my property less desireable.

While purchasers can always exercise their rights to cool off on a contract, I would think it unlikely that a purchaser who was not serious would go to the effort of signing a contract and then bailing.

Just my thoughts.

K

OK, when you say a written offer, you mean you go to the agent's office and sign a contract for the property, or some other form, or maybe I "scribble" my own offer on a piece of paper? It usually includes a sum of money, yes? 10% sounds ridiculous on an initial offer, but you tell me from your experience the norm.

So let's get to the crux of the matter and spell out the usual form a written offer takes, since from previous threads it's still a little vague. Thanks.

Wewaz,   I wrote a post on this topic on this thread here which should cover the questions. http://www.propertyinvesting.com/forums/property-investing/help-needed/4323410

On the issue of what the offer is written on, I would reccomend that you use the correct contract forms that are available on line to anyone.   These forms are not weighted to either side in particular.   As a legal point, I did hear of a case where an offer written on a table napkin and signed by both parties was upheld in court to be a binding agreement - but who wants to take the risk.

Jon

www.BrisbaneUnits.com

yes, just go to the agents office & he will draft it for you & then present it to the owners.

probably talk to your own Lawyer first if you have never done this before, as you will need to protect yourself with conditions to contract... ie, make offer subject to Finance and/or Building & pest inspections & time allowance to achieve these things... what items you may wish, if any, to stay at property maybe...
 your agent will let you know what to look out for if he is a local professional.
bear in mind though, that you want the offer to be attractive to the owner so don't go overboard on conditions unless you do need to add them...
get it straight in your mind when you need the property to settle etc also (30 days 60 days 90 days) sometimes its worth asking agent what the owners are after... ie if they are building they may wish to settle early & rent back for 6 or more months but if they have bought already & there is a 120 day settlement they may want to settle on same day so they are not "homeless" for a couple of months...
bottom line... do your due diligence & learn as much as possible prior to offer so your learning curve is not an expensive one.

hi guys

this info's great but where can i download the written offer templetes from i live in NT?

Aimee

'Never get so busy making a living, that you forget to make a life'

I would recommend you go to your RE agent or your property lawyer to write it up, as it is a legal document & needs to be filled in correctly to be enforcable... a badly worded offer can set you back in time & possibly money... do it right the 1st time & you have less chance of problems later on.

Mackar

thanks mackar

doesnt it take longer to organise a day and time to go in to the agents office just to make an offer though???

what if im prepared to make an offer right there and then but would prfer it to be written?

or do i make my really low offer verbally and then my last offer written?

cheers

Aimee

'Never get so busy making a living, that you forget to make a life'

doesnt it take longer to organise a day and time to go in to the agents office just to make an offer though???

That would depend on just how interested you were in the property.

what if im prepared to make an offer right there and then but would prfer it to be written?

Tell the agent, they may have a proformer contract prepared and on file.   If not they should take your details and go to you to get signed.

or do i make my really low offer verbally and then my last offer written?

This is called 'fishing' and really low offers are usually given by buyers trying to find out where the Seller is with price.   If it is a really low offer, my usual reply will go like this -"My Vendor says to thank you for your offer, however at this time it is not sufficient to secure the property would you like to revise your offer."   Most Sellers are not stupid, most know roughly where their property is positioned and silly low offers are usually treated with the disdain that they deserve. 

Jon

www.BrisbaneUnits.com

thanks jon

i didnt mean like a silly low offer sorry if this sounded that way i meant a reasonable low offer than what the asking price is.

for example im not going to make a 300K offer on a 400K asking price.

but thankyou for your thoughts

Aimee

'Never get so busy making a living, that you forget to make a life'