Offering In Competition
Buyers, particularly first home buyers, should never be discouraged from seeking a wide range of information and advice before offering on a property. But advice can often be conflicting and confusing and can result in an offer being unattractive, especially when there’s brisk competition for that dream home.
Sometimes I encounter buyers offering in a deadline sale who have been advised to make their offer subject to due diligence, commonly 10 working days till confirmation. On the plus side with such a clause, many other conditions can be encompassed in the due diligence investigation such as – finance, building report, electrical report, LIM report etc. But it makes an offer highly conditional. It essentially means a buyer can very easily walk away from a contract for almost any reason relating to the property although a vendor may be able to require objective justification for failing to confirm. An offer of this type, even if it is the highest, will usually be approached with significant caution from the vendor.
No professional consultant is going to discourage a buyer from carrying out full inquiry into a property. However, the realities in a competitive buying market are that, all things being equal, vendors will often choose a simple offer, even if that offer is a little less than a highly conditional one. So, how do you as a buyer put yourself in the best possible position before offering?
Check with the sales consultant whether or not you are likely to be in a multiple offer situation. This will help you decide how much you need to sharpen your terms. If the property is being sold by deadline, buyers will usually have a reasonable time-frame, at least a week, to carry out homework. The consultant will often have a LIM and there will usually be time to get building and electrical advice and to sort finances with your mortgage broker or bank. Even then, it might not be possible to offer without being subject to finance.
And by the way, a finance clause can cover more than finance. If the bank requires a valuation, electrical or building report, for example, before loan approval, the finance clause may cover these but it is good to be explicit about your investigations in your offer. You should always clarify with the bank if you can offer without being subject to finance. After all, this is what buyers at auction have to arrange. And if the bank has given pre-approval but won’t allow you to offer unconditionally, ask if you can make your offer subject to three, rather than five or more working days. It might prove to be a crucial advantage.