By Munro Donen, Director & Principal, Propertybuyer East propertybuyer.com.au
The basics of buying a property are reasonably simple. The challenge is getting the most favourable overall result from the buying process. For example, price is important but often the best outcomes relate to the contract’s conditions. By using contract conditions to your advantage, it’s possible to make your offer more attractive than others, particularly in a competitive market.
The basics of buying a property are reasonably simple. The challenge is getting the most favourable overall result from the buying process. For example, price is important but often the best outcomes relate to the contract’s conditions. By using contract conditions to your advantage, it’s possible to make your offer more attractive than others, particularly in a competitive market.
Here’s how I get on the front foot in negotiations right at the start of the process.
Buyers’ agents carry out due diligence on properties quickly and accurately. We use our market experience to remove as many uncertainties as possible.
For example, buyers’ agents can rapidly assess a home’s market value by relying on their knowledge of comparable sales. A buyers’ agent knows how to make an offer very attractive to a seller which can save you money via a reduced price while keeping you ahead of the pack.
One thing that’s often negotiated is terms related to finance. Most contracts include a clause that says the buyer has a certain number of days to get the loan approval needed to settle on the property. If the buyer fails to secure approval in that time, they can walk away from the contract.
Sellers far prefer offers where the finance clause has been waived. That’s why purchasers using a buyers’ agent are so appealing to selling agents. We make sure our clients have a pre-approval before we start the home search. That way we only seek listings within the buyer’s budget. As such, we can often waive the finance clause and negotiate on price as though under “auction” conditions. I have often seen instances where a seller will accept a lower “bird in the hand” price from a buyer who waives the finance clause compared to a higher “bird in the bush” offer from a finance-conditional buyer.
Another area where we suggest a client could waive contract terms is in relation to building and pest – but never buy a building report prepared for the seller because these are often basic and lack enough detail to uncover all potential problems. We always recommend an independent building and pest inspection be ordered directly by the buyer, and your buyers’ agent can suggest a reputable specialist from among their professional network to complete this for you.
To illustrate, I was buying a 100-year-old terrace house in Paddington for a client. I convinced the buyer to order their own $595 comprehensive building inspector’s report from a licensed specialist rather than relying on a basic report prepared for the vendor. As a result, we discovered a roof defect that would have required in excess of $80,000 to remedy.
Arranging for this building report to be completed during contract negotiations gives us the opportunity to allow for its findings as part of our final offer. We might choose to waive the building and pest clause if the report is clear, which makes our offer even more attractive to the seller. Alternatively, if there are significant defects, we can reduce our offer price or request a remedy before settlement.
The goal is to take care of due diligence quickly so that the buyer can confidently waive the standard five-day cooling off period applied to contracts in New South Wales. This waiving is done via a 66W certificate issued by the purchaser’s solicitor and it’s a powerful way to make a competitive offer.
The amount of time between when a contract is signed and when the buyer is handed full legal ownership of the home is called the settlement period. The length of the settlement period is often 42 days in New South Wales, but it can be changed by agreement between the parties.
Buyers’ agents will ask selling agents questions about what the seller would like to achieve from the sale, and that will include whether they are interested in varying the length of the settlement. Some might be keen for a short settlement, but others will need extra time. Being flexible on the settlement terms can be a huge competitive advantage as a buyer. This is where buyers’ agents and sellers’ agents can collaborate. However, one thing to remember is that in New South Wales, stamp duty must be paid within three months of signing the contract. This needs to be factored in when extending the settlement period beyond 90 days.
There might also be instances where a seller hopes to rent back the home from the buyer for a period after settlement. Again, a buyers’ agent will know how to negotiate this to ensure the buyer receives adequate rent and fair conditions under the agreed leaseback.
It’s important to understand contract conditions and how they can impact the eventual sale price. This is why the clients of buyers’ agents have an advantage over others in the market. While good buyers’ agents will never put their client at risk by suggesting necessary clauses be waived, being flexible on contract conditions can be a great way to secure a property.
To have one of the friendly Propertybuyer Buyers' Agents to contact you:
call us on 1300 655 615 today.