Best way to secure a property on private sale

A new property just came on the market which is within our budget and it is in the suburb we want to live in.

The SOI quoted the property within the high 500k to the low 600k range. We believe this property is worth at least mid 600k. However, our budget is in the 600k to the low 600k range and there will be buyers offering mid 600k for this property which would be over our budget.

What approach would you take to secure the property within our budget and at the best possible price without getting into a bidding war that will shoot the price out of our budget?

 

Thanks for the reply, Y-man.

How would you get in a position to make a strong offer when we're in a hot seller's market?

In terms of mindset, I have 4 properties lined up after this but this one is way above the rest in terms of value and quality and I believe this type of deal only comes up once every few months!

I had a chat with my mortgage broker regarding my finances and he said 29 out of his 30 lenders would lend to us. However, I don't want to have that 1% risk and losing our deposit. Thoughts?

In regards to making the offer, would they care about my story? Wouldn't they just look at the $$$?

The vendor has been living in the property since 1990s so he/she might want to sell it to someone who will care for it instead of turning it into an IP. Because of that, I was thinking of going the "I like your property and it will be in good hands" route even though textbooks say you don't want to look needy in a negotiation.

 

If you really want this property, offer the highest price you are prepared to pay. Don’t play games, you may not get a second chance.

Frankly, most sellers won’t care what you intend to do with it. Usually the highest price offer wins.
Marg

 

I'm willing to offer the highest price on their quoted range. However, there are two things I'm concerned about:

1. They come back with a higher offer. Why not offer something in the middle and come back with another offer at the highest price in their quoted range?
2. Too early. They will have their first inspection this week. When would be the best time to make an offer? Second-week inspection, first week? I was thinking if I give them the highest price in their quoted range in their first inspection, that would make them think "Actually, I can sell the property for more." which would be over my budget.

 

We're in a hot market but personally, I believe the market is still strong fundamentally. Even though our household debt is increasing, that is a given it today's low interest rate environment. The real question is what happens when interest rate increases to 2,3 or 4% (cash rate)?

I also believe the downside risk is very low (10-20%) with a very strong upside in the long run. For someone who invests in shares, the risk with real estate is surprisingly low even with the amount of leverage it offers. I think that is why banks are willing to borrow at 95% LVR for residential and if you compare that to shares, the LVR can range from 40% to 70%.

Even Commbank only allow investors to have a maximum 70% LVR on their own shares!

And, I don't believe in timing the market.

In one sentence, low downside risk (different investors have different risk profiles), strong upside, portfolio diversification, good capital growth with the ability to use equity to invest in other asset classes.

What if you have two offers, the unconditional offer is 10% lower than the conditional offer (subject to finance and B&P), what would be your thought process when making a decision?

 

tell the agent after you buy a property you will have a property to sell (hopefully you don't have to lie) in the same area

 

Given most properties are around $400K, 10% is at least $40K difference. I wouldn’t give that much away unless the property had multiple faults.

On one property we sold we accepted $6K less. It was an older property with quite a few issues. The lower offer came from a builder who was aware of the condition of the property. The higher offer came from a young, first time buyer couple, who we felt would be very likely to be scared off by the B&P report. Sale went through without a hitch.
Marg

 

1. Give it your best shot. Offer your absolute highest price. Then if they come back with a higher offer you can console yourself with the knowledge you simply could not afford it. The person with the most money usually wins.

2. The vendors don’t know you are waiting in the wings. Next open day they get a good offer. In the absence of anything else, they accept. You never get a chance. Months later you find out the sale went through at a price below what you were planning to offer.

Just go for it.

I would suggest making your best offer, put a time limit on it (48 hours) to bring it in before the next open day. Make it clear to the agent this is your best and final offer.

I am not into playing mind games, but it never hurts to tell the agent that the reason for the time limit is that you have your eye on another house, you prefer this one but want to offer a contract on the other if this contract is not accepted. (If asked for details, don’t give any. The agent is not your friend.)

Good luck!
Marg

 

I doubt we will go back to 18% rates in my lifetime too eventhough I'm still fairly young.

Personally, as a first home buyer, I have some concerns about unconditional offers because there might be what/if scenarios that I can't foresee because of the lack of real estate experience. I think this might apply to other first home buyers too.

Compare to let's say an investor + builder who has 30 years experience, he/she is able to have a strong gut feeling whether the property is structurally sound and whether a B&P inspection is needed or not. He/she might also have strong confidence based on their finance that they have a lot of equity in their other properties to guarantee that banks will lend to them.

Regarding settlement, why wouldn't the buyer want to match that 30-day settlement or shorter if the vendor wanted it?

Two questions for @The Y-man @Marg4000 :
1. The max I would pay for the property is $630k which is at the top of the quoted range.
Wouldn't it be better to offer $610k then when the seller comes back with a $630k offer, we can meet in the middle or match his offer? If we offer at the top of the quoted range, wouldn't he request for a higher price (640, 655, etc) or go "Actually, my property is worth more than the quoted range" which I believe it is and sit and wait for another offer?

2. The first inspection is coming up this weekend. When would be the best time to make the offer? Asap? Second week inspection?