You’ve found the home you really love. It ticks a lot of your boxes, and you want to put an offer in. This is where the fun starts – what is a reasonable offer? You don’t want to go too high and lose money, you don’t want to go too low and jeopardise any chance of a deal being made. In this real estate vlog Henry takes an in-depth look at how to come up with a sensible offer for a property.
“Hi, I’m Henry Wong. We’re here to discuss what to offer on a property.
So you looked at a few properties and you’re interested in one in particular. Now a good rule of thumb is if a property is seven out of 10 rating, as in what you rated your level of interest, I will strongly suggest you make an offer.
Now number two is when you make an offer, ideally you want to make a very reasonable offer. Now let me explain what a reasonable offer is. Say for example, the property you’re looking at, the asking price is $1 million. Now you’re thinking, okay, you know what? They need to probably do a bit of painting, change some carpets, maybe change a few of the fences, and your offer is, say for example, $950,000.
Now this $950,000 is somewhat reasonable I guess, within 5% or so. Now, what you should not do is make a low ball offer, especially if you’re prepared to pay $950,000. So if you’re prepared to pay $950,000 don’t go offering the seller $800,000.
Now why I say that, is because if your prepared to offer $950,000 and yet you’re offering the seller $800,000, now obviously the seller’s going to say no, the gap is too far, thank you very much. But also you need to bear in mind sometimes a seller will see that as rude or even offensive. So that would actually be, I guess you could say, a negative connotation when your name comes on to conversation. So probably not a good idea to offer $800,000, just go for $950,000 or close to that if you’re going to make an offer.
Now it will be very different if you only saw value $800,000 instead of a million and you’re not prepared to go to $950,000. So that’s what I mean by a reasonable offer.
Number two, when making an offer, here’s what you do to determine at what price you should make an offer.
Well, number one, you want to look at what has sold in the past. That means you look at realestate.com.au, domain.com.au, and if you have RP data, look it up on RP data. That house sold for that, that house sold for that, that house sold for that, therefore I’m going to offer x amount of dollars.
You also look at what is currently up for sale. So obviously what has sold in the past, you can’t buy that anymore. But what is currently for sale you can.
Number three is what you don’t know is the competition. So this is a question mark. You have no idea how many other buyers you’re bidding against to buy the property.
So when you’re making an offer on a property, you think about the past, what’s on in the past, what’s currently for sale, but also you may need to pay that extra x amount of dollars to secure the property because you don’t know who else you have to compete with.
So those are the three elements you need to take into account when making an offer.
So lastly, in addition to what we’ve mentioned before, with respect to coming up with a figure to what you’re prepared to pay for on a property, now there are three different prices that most buyers come up with.
Now the first one is you’ll be like, wow, you know, if I can get the property at this price, I’ll be over the moon. It’s an absolute bargain. Now you have to understand, these days, if you love the property, more than likely quite a few other people are also interested in as well. So that means you have to compete. So quite a lot of the times you may not actually get the bargain price, to be honest.
Number two is you see, hey, I’m like looking at making an offer on this property. It’s fair market value, it’s market price, it’s quite reasonable, therefore I’m willing to pay x amount of dollars. That’s fair enough. That’s where most buyers actually pay.
Number three, this is when you actually have to compete. So when you actually have to compete for a property, you want to pay a price that you don’t want to lose it for. What I mean by that is if a property, say for example is $950,000 asking price, and you’re looking at paying $910,000, you don’t want to wake up the next morning with the agent giving you a call and saying “Thank you Mr and Mrs buyer” or “Thank you Mr Buyer or Mrs Buyer. We actually just sold the property. It’s under contract for $920,000.” And knowing that you could have paid more money, that you could have paid $930,00 but you decided to go in at $910,000. That’s what I mean by an offer that you don’t want to lose the property for. So at the end of the day, you don’t want to have any regrets.
So what I’m saying is that when you’re making an offer on a property, you want to pay a price, that when you wake up the next morning, you know, if I can get it at this price, I will be, I’ll be happy. You know, it’s a bit of a stretch for me a bit uncomfortable, but you know what, I will have no regrets because I love this property. That’s what I mean by don’t want to lose it for.
So there you have it. That’s what to offer on a property.”