If you’ve come across a property that you think is a great purchase, chances are someone else is thinking the same thing. Desirable real estate is likely to have many interested parties and potential buyers, so it’s a good idea to be prepared and know how to make your offer stand out. It’s worth knowing that it’s not always the highest bidder that wins.
If you start the bidding, don’t make a high first offer. There’s no harm in being conservative with your first bid. Know your upper limit and remember not to let emotions get in the way. To find this upper limit, it’s helpful to gather expert advice e.g. a local realtor who can provide an accurate estimate of the property’s value, through factors such as recent sales of comparable homes, local auction results or the property’s current condition. You can also access all of this information with a free property value report.
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The auction process can be stressful. If you fear emotions may run high, consider asking someone you trust to bid on your behalf. Providing your bidder with a strict limit can mean you avoid exceeding your budget by bidding on impulse. Another option is to engage a buyers agent who can submit an offer for you and act as your representative throughout the buying process.
This tip can go both ways - in that you should try and match the seller to the terms they prefer, whether that’s a shorter or longer settlement. If a seller would prefer a quick settlement, by offering a shorter settlement period, you can influence them to lean towards your offer. On the other hand, if the seller hasn’t found a home to move into yet and would prefer a later closing date, accommodating this could also work to your advantage.
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If you’re sure this property is the one, consider making an offer prior to auction day. If your offer is competitive, above reserve price, and you make it clear to the seller that you do not intend to bid at auction, the seller has to make a choice whether they want to risk losing your offer. This technique can be particularly persuasive in areas where the property market is more volatile. Some buyers also like to accompany their offer with a personal letter sharing details about the potential new occupants of the home.
Read more about buying auction and private sale here.
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This is similar to the third tip in the fact that it reduces the period before settlement and is favourable when sellers want to sell their property fast (which is generally the case). However, bear in mind this only applies to private sales and does not apply at an auction, where in Australia, contracts are exchanged on the day and there are no cooling-off periods.
One way to show sellers you can confidently pay for their property is giving them a letter of pre-approval. This is an offer given by your lender to provide you with a home loan for a fixed amount of money based on an assessment of your income, assets and liabilities, as well as credit history.
Read our guide to home loan pre-approval to learn more.
Being pre-approved not only allows you to know what you can or cannot afford, but also gives sellers reassurance that you are able to finance your purchase. Another way to give them this confidence is to be transparent about your finances, whether that’s sharing your employment details or the number of assets you own. Building trust in this way can help sellers to see you as a better candidate.
While price is the most important discriminator to who succeeds in winning a bidding war, the other terms of the seller cannot be discounted either. This might mean complying with a specific closing date or making other concessions elsewhere. Many sellers might need to align their closing date with the settlement date of a new property are buying. If you can be flexible, meeting the seller’s terms can increase your chances of outbidding the competition.
By adopting these 8 steps, you will hopefully make the winning bid on your future home.
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