How to make an offer | The Complete NSW Buyer’s Guide

Purchasing a property is frequently the most substantial financial commitment one can undertake, and making an offer is a crucial milestone in this journey. It’s essential to be well-prepared before presenting an offer to the agent or seller.

• To start, obtain a copy of the sale contract at the earliest opportunity and have it reviewed by a licensed conveyancer or solicitor. This ensures that you fully understand the terms and conditions involved.
• Ensure your finances are pre-approved. This step not only clarifies your budget but also demonstrates to sellers that you are a serious buyer.
• Offers can be made either verbally or in writing. Submitting offers in writing, such as via email, can help you keep track of negotiations and provide a clear record of why an offer may not have been accepted.

In this article, we talk about the common things to consider before you make an offer for a property – including some practical insights from our experiences in the market.

Getting your finances in order

Before you even think about making an offer, it’s essential to have your finances in order. This means understanding your budget and knowing exactly how much you can afford to spend. Here are some steps to consider:

• Speak with a mortgage broker: One of the first things you should do is consult with a mortgage broker. They can help you understand your borrowing capacity and assist in securing pre-approval for a loan. Pre-approval not only gives you a clear idea of your budget but also strengthens your position when making an offer, as it shows sellers that you are a serious buyer with the financial backing to proceed. In our view, a good broker is worth their weight in gold as they understand financier requirements better than most. The cherry on top – you don’t pay them a cent. Brokers are paid directly by financiers and it won’t cost you a thing. This makes using a good broker an absolute no brainer! Now, we know what you might be thinking. What makes a broker ‘good’ and how can you find them? We are here to simplify this for you. Over the years, we have worked with many different brokers and over this time, we have identified some of the best brokers in Australia. If you don’t currently have a good broker, get in touch with us and we will get you in touch with one that we highly recommend. Note that we are not affiliated, nor do we receive any financial benefit from such recommendations. If we recommend another professional, it is solely because we believe they are experts in their field.
• Budget for additional costs: It’s easy to focus solely on the purchase price, but don’t forget about the additional costs involved in buying a property. These can include stamp duty, government transfer and registration fees, legal fees and moving expenses. Make sure you have a comprehensive understanding of all the costs involved so you can budget accordingly. Again, a broker can assist you with this process.

Conducting market research

Once you know how much you can afford to borrow, the next step is to decide on the area you are looking to purchase in. Now, for some, this may be a specific street within a particular suburb or it could a general region (e.g., the Inner West of Sydney).

Understanding the property market within this area is key to making a competitive offer (once you identify the right property). Here’s how you can arm yourself with the right information:

• Comparative market analysis: Research recent sales of similar properties in the area to gauge the market value. This will give you a realistic idea of what you should be offering and help you avoid overpaying. In our experience, most buyers use either realestate.com.au or domain.com.au to track recently sold properties.

• Local market trends: Stay informed about local market trends and economic factors that could influence property prices in the suburb/area you are looking at. This might include things like interest rate changes or new developments/infrastructure that is proposed for the area. Being aware of these factors can help you make a more informed decision.

If you do have any issues completing this market analysis or if you simply want a professional to guide you through the buying process, please let us know as we do regularly work alongside some of Australia’s leading buyer’s agents and can definitely recommend someone to you (based on the area you are looking within). Again, we are not affiliated, nor do we receive any financial benefit from such recommendations. If we recommend another professional, it is solely because we believe they are experts in their field.

Completing your due diligence

Okay, so you now know exactly how much you can afford to borrow and have completed all of your property research. This has led you to restrict your property search to a couple of suburbs. What follows is the relentless grind of property inspections, weekend after weekend.

As you are about to give up, you find the property that ticks all of your boxes. The agent confirms it is available but may sell at any time if a suitable offer comes in.

In an ideal world, the next step is for you to conduct thorough due diligence on the property you’re interested in. This is a crucial part of the buying process and can save you from potential headaches down the line.

• Building and pest inspections: Before making an offer, it’s wise to arrange for professional building and pest inspections. These inspections can uncover any structural issues or pest infestations that might not be immediately apparent. Knowing about these issues beforehand can be crucial in negotiating the purchase price or even deciding whether to proceed with the purchase at all.
• Reviewing the contract: The contract of sale is a legally binding document, so it’s essential to have it reviewed by a lawyer or conveyancer before you sign it. They will ensure that all terms are fair and that there are no hidden clauses that could affect your purchase. This step is vital to protect your interests and ensure that you fully understand the terms of the sale.

Now, as we said – in an ideal world, you would follow the above steps before you make an offer. However, we know that life doesn’t always pan out this way. Often, when you do finally stumble upon that perfect property, you are not the only buyer that is interested. We’ve all been there. You have spent so much time finding the perfect property and now that you have found it, you don’t want to let it slip through your fingers.

Whilst it’s not ideal, we do see many buyers who are in this position make offers on properties (and sign contracts) before they have had the contract reviewed or completed any due diligence. Whilst this approach does allow you to secure the property (because one the seller signs the contract and the agent exchanges it, the seller is bound to sell the property to you – they cannot change their bind or accept another offer), it may come at a cost.

Let’s play out the above scenario. John finds his dream property at an early morning inspection on a Saturday. During the inspection, he overhears another couple who also love the property. He doesn’t want to lose out on the property and so, he goes ahead and submits an offer on the property right after the inspection. There is a bit of negotiation with the agent, but a price is agreed. The agent issues a contract to John. John immediately signs it in an effort to get the property off the market and to lock in the seller. The next day, John speaks to his lawyer and advises them that he has had an offer accepted on a property and has signed the contract – he provides a copy of the signed contract to his lawyer.

In New South Wales, John is entitled to a 5-business day cooling off period, which commences the day after the contract date. During this period, John can have the contract reviewed by his lawyer and can also complete any due diligence. If any issues are identified, John is legally entitled to terminate the contract and walk away from the property – as long as he does this within the cooling off period.

Now, you might say that the above scenario sounds a lot like the ideal scenario. Well, there is one small difference. By signing the contract, John would have paid a 0.25% deposit. If John decides to terminate the contract within the cooling off period, he will forfeit this 0.25% deposit to the seller. For example, if the purchase price is $1 million, the deposit forfeited by John would be $2,500 (which is not an insignificant amount).

For this reason, we always encourage our clients to complete all of their due diligence before they make an offer. However, if you are in a similar position to John and you simply want to secure the property as soon as possible (that is, you are comfortable getting all of your due diligence completed during the cooling off period), this approach is fine – as long as you are comfortable forfeiting the 0.25% deposit if any issues are identified during the due diligence process which results in you terminating the contract during the cooling off period.

Final thoughts

Buying a property is a significant investment, and taking the time to prepare thoroughly can help ensure a successful transaction.

By getting your finances in order, completing all necessary due diligence, having the contract reviewed by a lawyer, and conducting thorough market research, you can make an informed and confident offer on a property in New South Wales.

Remember, this is a big step, and being well-prepared can make all the difference in achieving your property goals.

We highly recommend getting a lawyer and mortgage broker engaged before you start your property journey as these professionals will ensure that you are correctly guided through the whole process.

Need help buying property?

If you need a lawyer to act for you in relation to the purchase of property, please check out our Buying a Property Information Centre, where you can get more information about our conveyancing services and get an instant quote.

Alternatively, you can give us a call, send us a message or book a call with us by clicking the below buttons.