Hello,
My partner and I are on the prowl for our first home and after a long hunt entailing several disappointments, we think we’ve found a one bedroom metro Melbourne apartment that appeals.
We have a 5% deposit so now I need to negotiate with the estate agent, as the property is going to auction in early June.
Any tips to negotiate this with success would be welcome. I’d normally offer flexible settlement terms (e.g. 30/60/75/90) to suit the vendor, but the vendor is already very specific about the settlement date as he is moving out to his new home.
Could I hint that we are VERY interested (i.e. the vendor would be foolish to rule us out of the competition) or is that the last card I should play?
Further, I’m a little nervous that although our credit union has pre-approved our loan, they may say we’ve bid too high and refuse finance. How can we get a sense of what’s a reasonable price in the current crazy market. We’re happy to go up to $460K because we really like the place, it’s in a great location and it suits our needs… but a lender may see things differently!
With thanks,
AlyssumI've always found that being straight up with agents works. I've often negotiated set deposit amounts prior to auctions (ie, say $30,000 exactly, regardless of price) and asked for them to seek approval from the vendor.
It's good that you're aware of the issue re bidding too high for your loan approval – the easiest way to get around this is get the property valued prior to auction – ensure that you're using the right valuer and instructing them appropriately. If you can find a valuer that is on a bank's panel, it would be better.Auctions sometimes don't give much room to negotiate terms, they set them and that's that.
You can use a deposit bond for deposit, takes maybe 5 days to organise thru your bank. (If negotiations with agent not successful.) Will cost you several hundred dollars, but if not successful you can use it as a deposit on another property.
On the other hand, you can put in an offer before auction.Be wary opf paying more at auction than your finance will cover!
quickchick
Most pre-approvals will indicate a maximum amount of the loan (based on servicablity) that you can borrow and a maximum LVR so if your looking at 5% deposit (LVR =95%) your maximum loan for a $460,000 property should not be less than $437,000.
If the max loan amount is less than this re-do your figures to work out what you can pay for the property
Don't forget you will also need to pay Stamp Duty (approx $20,000) and also Mortgage Insurance premium and registration costs etc. Your Credit Union/Bank Loans officer should be able to run through this with you
You say melb metro : what suburb?
Make sure the apartment meets the mortgage insurers security requirement. In some cases 95% might have restrictions e.g. Must have own laundry facilities etc, minimum size requirements etc.
I have rarely purchased a property with more than a five percent deposit on the day. Simply ask the agent if every-one's happy with that. In the end it really makes little difference to the vendor unless they are looking for a S27.
Also check with your lender what their minimum apartment size is that they will lend on. Some one beds won’t be lent on depending on the policy and size. It may also affect your LVR requirements.
Hello all,
Thank you for your guidance – I feel reassured that I’m heading down the right track. The apartment meets all specified LMI requirements (i.e. exceeds 50 square metres, including balcony and car park, is in building of 30 or less apartments and of 4 or less storeys, not located in central business district).
My plan of attack is to send the contract of sale to my conveyancer, then following her assessment, test the real estate agent’s reaction to a 5% (or fixed value) deposit and subsequently arrange a valuation through our credit union ($250 which would be charged anyway, if we are the successful bidders). Does a valuation require a site visit or are they a desktop process?
Phew! 13 sleeps to go!
Best wishes,
AlyssumI always ask for a 5% deposit (money is better in my pocket till settlement). Agents tend to expect 5% these days – lots of people ask for 5%. I have found that they would prefer 5% than a deposit bond – not many agents like deposit bonds as they aren't a guarantee.
Why wouldn't you get a valuation undertaken by an acceptable valuer to your lender and commission this yourself in advance so you have a good indication as to the likely figure you can bid upto.
Richard Taylor | Australia's leading private lender
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