You’ve been doing the open home circuit for a while and finally find something you would really like to own. You let the salesperson know you’re going to put in an offer… but for how much?
Deciding what to offer on a property can be difficult. You don’t want to pay too much. But if you offer too little, you risk missing out.
How low should you go?
If a property is listed “for sale by negotiation”, “offers over” or with a price, you can make any offer you like. The vendor is under no obligation to take a cheeky offer seriously, though.
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If you can, identify some similar properties that have sold recently, and what the buyer paid. A site such as Homes.co.nz or Trade Me’s Property Insights can help with this. If it was a very recent sale, you can ask the salesperson involved for a ballpark indication of the price.
You will also need to take into account any work required on the property, the amount of interest in it and the circumstances of the owner, if you know them.
Property blogger Andrew Duncan said he told his friends they should try to look at 15 to 20 properties in their target area and price range before thgy made an offer, so they would get an idea of what was a good price.
“If there is a property that is really well-priced you want to be able to jump on that and know what represents good value.”
If a property is listed at “offers over” a certain figure, the salesperson must be confident that the vendor would at least entertain offers at that level. But head of Trade Me Property Nigel Jeffries said it was not set in stone.
“Making an offer on a property is the biggest financial decision most people will make so it’s not something you can do lightly. Many properties do have an ‘offers above’ number listed on them when they’re up for sale and it’s totally up to the potential buyer if they want to pay attention to that,” he said.
“You can certainly make an offer below that figure and hope that the interest in the property is not very high and you might spend less than anticipated. You’ve got to be prepared to miss out to a buyer who is prepared to spend in and around that figure, though, and many people do. Some buyers are happy to do that because they’re not emotionally attached to the property while others are happy to pay a bit more to get a house they love.”
Duncan said buyers could look at how long a property had been on the market. If it was newly listed, a low offer would be unlikely to clinch the deal but if it had been sitting for a couple of months, the owners might be more willing to move.
He said, if a buyer knew they were offering significantly less than the vendor was expecting, they could tell the agent what they were willing to pay and say they would put it in writing if it was worth it.
But he said it was important not to let pride get in the way of the deal. “If the price is $800,000 and I come in at $700,000 and think the only fair resolution is to meet in the middle at $750,000… the middle ground is only created because I came in at $700,000. If it’s the right house for you, don’t be afraid to move and come up.”
What about other conditions?
Jeffries said it was usually the highest offer that would buy a house, but that is not always the case.
If there are two similar offers but one comes with a lot of conditions, the vendor might choose the simpler option, even if it means a bit less cash.
Duncan said first-home buyers were particularly likely to try to give themselves as much time as possible to satisfy conditions such as building reports. But they could lose out to someone who promised to tick that off more quickly.
Tips for making an offer:
Source: Andrew Duncan