06 August 2016 Buying your first home: Making an offer and negotiating Buying your first home can be an exciting time! The up-side is that you have energy and incentive to get off the rental treadmill and if you have been watching The Block, hopefully the inspiration to renovate and add value too. On the down side, first home buyers are typically looking at entry level properties with lower price ranges and this usually means some stiff competition. Starting your property journey off on the right foot is really important, because it can set you up for financial success down the track, but it takes some careful planning and strategy on how to buy your first home. So let’s kick start the purchase process so that you can hear the word “Sold!” sooner. How much to offer? The short answer is: as little as possible and as much as it takes! First, we need to remove the guess-work and get you ready to make an offer. This comes down to understanding local market conditions and being as informed as possible. You can purchase historical sales reports such as Residex property reports, but you also need to do your own homework to understand the market as closely as possible. Things such as attending as many open for inspections as you can, building relationships with local agents and signing up to their email blasts, keeping abreast of new listings, attending as many auctions as possible and keeping a log of property sale prices are all ways that can help you build as much knowledge as possible, before making any offers. The amount of your offer can be influenced by a number of criteria including: the type of sale process i.e. auction or private treaty, the level of competitive buyer interest and, your own market analysis of comparable property sales. For example, a property listed for auction within a market of strong buyer demand/high clearance rates may require an alternative approach to a property listed as a private sale. Auctions are within a public environment with all buyers declared where as private sales are less visible, with a potential longer transaction window. My advice to first home buyers is: When you are bidding, set your budget on an uneven number, for example $503,000 instead of $500,000. Act with confidence, be professional and understand that how you conduct your offer can make a big difference to your chance of success. Make strong offers (or bids). If you know the property is worth $600,000-$630,000 there is little benefit in commencing the bidding at $525,000. Get to the pointy end with a strong opening bid. Make your offer realistic and substantiated by analysis. ‘Low balling’ can often back-fire and misrepresent you. Be flexible and show the agent or auctioneer that there is some room for negotiation. When negotiating: Make your offers genuine and unconditional. Offers made subject to finance or inspections are not seen as firm offers. Maximise the power of your offer. In the instance of a private sale, consider a higher deposit and shorter settlement. All offers should be submitted to the agent in writing and accompanied by a cheque for an amount recommended by the vendor’s real estate agent, with a period for acceptance specified. Buying property for the first time may be overwhelming for many, especially when you have a limited budget and the property has strong interest. I would always recommend involving an experienced friend or relative – or even better, a professional buyer’s advocate to submit your offers and conduct the negotiations on your behalf. Remember, you are negotiating with agents who transact with property every day and having as much experience on your side can only be a good thing. Good luck!