You’ve received an offer for your property – congratulations!
When you get an offer, it’s tempting to focus on one thing – the PRICE!
But offers aren’t just about price, they normally come with CONDITIONS. And it’s important to consider the conditions when reviewing an offer, especially if you’ve received more than one.
In a multiple offer situation your best buyer may not be the one with the highest price, but the one with the best conditions. The attractiveness or otherwise of a condition will also depend upon your circumstances as a seller and what best suits you.
So aside from price, what should you be looking at with an offer?
The first is deposit. There’s a lot of discussion in our profession about the value of a deposit but I think a deposit serves two purposes. The first is that it’s an indication of the buyers intention to put some skin into the game. The second, which is particularly important if it’s a cash offer, is that it shows the rhetoric, as in having the actual cash to buy the property, matches the reality.
Settlement date is the next thing to consider. This is the date that, all things going well and the offer becoming unconditional, you get the money and hand over possession of the property. If you’re living in the property you have until 12:00 the day after settlement to move out, but you get the drift – you’re out!
Like any other condition, the settlement date can be negotiated to something shorter, ideally not less than 21 days from finance approval as the banks aren’t likely to get themselves organised in time, or something longer if you need to allow yourself time to find another property. It can also be agreed for it to coincide with the settlement of another property. Ask your agent for guidance if you’re not sure or timing is important to you.
The next bit is finance. Is the buyer borrowing or do they already have the cash to purchase the property? Subject to finance offers are the most common offer condition we see.
If the offer is subject to finance approval, pay attention to how long the buyer needs for finance approval – 21 days tends to be the standard – and what % of the purchase price they are borrowing. Borrowings higher than 80% of the purchase price may require mortgage lenders insurance and attract a higher degree of bank scrutiny. Has the buyer got other property they are using as equity or have they got a family member going guarantor? Are they pre-approved? Have they definitely got their ducks in a row in regards to their finance with a Broker or their bank? Don’t be afraid to ask your agent these questions or to ask them to find out if they’re unsure.
The bottom section of an Offer & Acceptance document is reserved for special conditions.
It’s normal for special conditions to include things like a seller warranty for all gas, electrical and plumbing items in the house being in good and proper working order and for buyers to make their offer subject to building and termite inspections. That said, the less conditions the buyer adds the better it is for you as a seller, and if you’ve got a renovators delight your preference may be to sell in “as is” condition without warranties or inspections.
If the buyer has included special conditions, read them carefully. Are they the REIWA standard or the agency standard conditions or are they something the buyer has written themselves? Sometime buyers like to write their own conditions which aren’t actually able to be met. Ask your agent to explain any conditions that you don’t understand so that you know exactly what it is that you’re considering and potentially accepting. When in doubt, you can also ask a settlement agent to check them.
And if the offer is subject to the sale of the buyers property and a two business day special condition, ask the agent to tell you about the buyers property and the likelihood of it selling. That said, I’ll leave explaining a Subject to Sale offer to another blog!
So there’s a lot more to an offer than just price and if you’re considering multiple offers it pays to weigh up both price and conditions so that you ensure you’re dealing with the best buyer, not just the highest one. And remember that conditions, like price, can always be negotiated.