Bargaining tips for first home buyers /Newsport
Monday March 24 2014
By Roger Ward
With the participation rate of first home buyers increasing in the economy and record low interest rates, it's worth a reminder to anyone purchasing a property that the bidding process is broken down into two parts.
The status quo, especially for first home buyers, is to make offers on a property in line with your motivation to buy.
This motivation changes from one property to the next as some may need work or have better locations.
Either way, most properties will vary in value depending on the motivation of the buyer.
For many, buying a home is something you will only do a few times in your life and it’s a very large financial decision for the inexperienced.
For many professional real estate investors, the buying process is broken down into two simple questions.
What is the lowest price the vendor is prepared to take?
Am I prepared to pay that?
The first question is the most critical.
What many are concerned about is that their own estimate of the properties worth may be higher than what the vendor is prepared to take.
Making a low offer, substantially below what you are prepared to pay, is a way of testing the vendors motivation.
It’s important to realise that vendors motivation can be different and some may need to sell quickly, at a price, or some make be wanting much higher than what you are prepared to pay.
The main thing here is to make sure the vendors lowest price has been determined and quite often this process results in the buyer getting the property for a lower price than they expected.
There are a few additional points that go a long way to put pressure on your vendor and you should consider advising the Real Estate Agent on the following.
1. Have a pre-approved loan before you make an offer.
This is a very important thing to do. You should tell your real estate agent you have this, however don’t tell them the loan amount you are approved for.
Vendors need to know the offer they are considering will have a high likelihood of success.
If they are under pressure, a pre-approval can make them crack.
2. Get an online valuation before you make an offer.
As they say, knowledge is power.
Online valuations give you vital information including the sales history of the property and the comparative sales in the area.
This valuation service is free for clients of NQ Home Loans.
3. Tell the agent how you want the bidding process to run.
There’s a strategy with some real estate agents to 'leave the buyer hanging' after making the initial offer.
This is where they say the offer has not been accepted with no counter offer.
This strategy is to test the buyers will and sometimes provokes them into lunging at the price with a much larger offer.
To stop this happening, tell the agent that if your offer is rejected.
Make sure the vendor comes back with a counter offer as you are simply not going to buy the property at full price.
4. Make counter offers in increments.
Small increases in counter offers can put additional pressure on vendors and save you a pretty penny.
With the knowledge you have a pre-approval in place, the vendor may just accept an offer lower than you expected.
Advice like the above is free for all clients of www.nqhomeloans.com.au.
All clients are offered a complimentary pre-approval at no charge before getting into the property market.
If you are thinking of buying sometime in the near future call us on 07 40579746 to arrange a pre-approval and get access to our free online valuations.