So how far can you take the negotiating? I have been given my pre-approval by the bank for $400K. I have found a nice tidy unit (1 of 3 on a block) and I have a tenant lined up.
My broker is in Adelaide, I am sure it will take some weeks to get the finance sorted as I was refinancing as well, I am going on holidays end of June for a while so I wanted to negotiate placing a $3K (which I have waiting) deposit now and a 90 day settlement (so I am back from overseas)
Agent wants 10% and tried to convince me 30 day is better so its done before I go overseas. I was planning on placing an offer before the auction which is next week but would like to know I can have these terms.
So wondering do I keep at it – or am I just wasting his and my time trying on my terms?
The agent is legally obliged to take all offers to the vendor.
The agent wants 10% because it will sit in the agent's bank account earning interest rather than in YOUR bank account earning interest. Also there is a perception that you are more committed to the deal if you have provided a bigger deposit.
The agent also wants a shorter settlement because then he gets his commission cheque sooner.
Remember than an offer is exactly that – an OFFER. You would OFFER a certain amount of money based on a set of conditions. The vendor is then welcome to either accept or reject your offer. Or they might come back with a suggestion on how you might ammend your offer to make it more acceptable to them.
There is no point pitching high first. Pitch your offer and see what they say. It's not like this is the last property on the planet and your life will be ruined if you don't get it.
Let me tell you about refinancing first. It will take at least 21 days to get the approval for the said refinance. But then your new bank will say they are unable to even talk to your old bank about arranging a settlement date (on which the new bank will take over your mortgage) for 3 weeks. So potentially a refinance could take 6 weeks or so to get at your money.
Finance applications in general will take at least 3 weeks, just to get their answer. Then at least another week for them to post the offer to you. You sign it, put it in the post, send it back to them, it sits in their mailroom for a day, then it gets scanned in, and someone looks at it a couple of days later. As you can see, agreeing to buy something on a 30 day settlement if you are dependant upon applying for a loan is extremely foolish. 60 days minimum I'd say. That provides for 5 weeks of mucking about with finance, then leaves a few weeks to enable your solicitor to book in a settlement date with the bank and the titles office.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
ps, remember to put in a statement on your offer that says "this offer expires at 5pm today, <<insert date here>>". Otherwise say the property goes to auction, and the highest bid is less than your offer. Then they could ring you and accept the offer you provided before the auction. Yes apparently these sorts of shenanigans do in fact happen.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks JacM, great to know I can hold some sort of control over the terms. Now I know why my broker said to offer a small deposit LOL
So its best to put expiry of offer prior to auction? So in this case the auction is Saturday, should I put Friday 5pm?
Hello,
Whilst we work in Victoria, I am happy to pass on some general advice:
Deposit: whilst you can of course negotiate your deposit amount, it is ultimately the vendor's decision on the deposit amount they will accept. Keep in mind that 10% is a general figure that is likely to ensure security. Interest earned on deposits cannot be kept by a real estate agent, it is paid to a government fund applicable to each state.
Offer: Don't make an unconditional offer when you are awaiting finance approval. We see this a lot! The problem is that if by some chance your finance falls through, you will end up paying the vendor compensation. Make you offer 'Subject to Finance' and also expiring before the auction. If the vendor does not accept your offer, be sure to receive confirmation the offer has been rejected from the agent in writing.
Settlement: In your situation I would recommend pushing for a 90 day settlement. Whilst it is likely the vendor will not accept as the property is going to auction and by the agent's push for 30 days they are likely in a hurry to settle, it is always best to ensure your offer matches your requirements rather than the vendor's preferences.
Best of luck with your purchasing endeavours!
Thanks Kristin!
Have been doing some heavy thinking on this one, and I really hate being pushed and hurried so although I will attend the auction I don’t think I’ll be putting in a bid at this stage.
There’s plenty of time for something else to pop up, and as they say all good things take time.HI all,
Just a couple of points re Jac's post – the special trust accounts that agents have to use for deposits do not pay interest to the agent – and the reason they like the higher amounts is more often than not so they can get the commission amounts 'released early' not for interest.
And if your bank (or if you broker tells you this) takes 5 weeks to give you a loan approval answer you are doing the wrong thing and borrowing from the wrong place. Obviously you need to allow for contingencies and glitches and Murphys law – but 20 days at the outside for unconditional approavl should clinch it – assuming you have provided ALL the documentation required, and your solicitor has been useful.
I have just approved unconditionally a SMSF deal to formal offer stage in two weeks, so if that can be done…….you get the picture.
All the best with whatever you purchase though Kat,Cheers
Hi Kat 13
I’m an ex real estate agent and the deposits are held in a trust account, no interest will be gained from this,
Not sure where jac m got this point from????But I do agree with jac m in terms of setttelment
30 days will benefit the agent60 to 90 days is a safer option for you,
It gives you time to process the loansMaybe what you can so is say this to agent if the vendor wants 10% and 30 days settelement then I want the sale of the price to be lower
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
You must be logged in to reply to this topic. If you don't have an account, you can register here.
