Made an offer on a property which was accepted, but now I think i've offered too much - options?

ambidextrous on 13/03/2014 - 23:41

Hi All

I've made an offer on my first property but as soon as it was accepted, I felt something was wrong. The real estate agent called back within 5 minutes of talking to me on the phone after my email offer saying the vendor has accepted. I fear I may have offered too much. I based my offer on similar units in the block which was posted on realestate.com but im sceptical as i'm sure that the real estate agent post these sale prices (could be inflated prices?)

No money has exchanged hands or any other steps except engaging a lawyer, only offer and acceptance.

My plan is to see what the bank's valuation of the property is before I make a decision to pull out, but my question is, am I able to withdraw my initial offer and offer a lower amount if the valuation is lower?

This is in NSW

All help much appreciated

Financial

Comments

  • strangeloops66 on 14/03/2014 - 00:41
    +3

    There may be a cooling-off period in NSW, but if there is, that would only apply once a contract had been signed. Thanks to late 17th century English legislation copied by all states in Australia, a contract for the sale of real property needs to be evidenced in writing to be enforceable. No written contract, no deal.

  • bluetongue on 14/03/2014 - 01:01
    +4

    From NAB website - If you make an unconditional offer and the vendor accepts it, you are obliged to buy the property on the settlement date. Once the contract is signed and deposit paid, you can’t break it. A verbal acceptance is not good enough. If the vendor accepts your verbal offer, but you change your mind, you can still pull out if you haven’t signed the contract. So as strangeloops66 wrote - no contract, no obligation.

    • infinite on 14/03/2014 - 01:20
      +5

      Even if you make an unconditional offer on paper & the contract is signed, there is still a cooling off period, where you can safely back out.

      • [Deactivated] on 15/03/2014 - 18:45

        Exactly what infinite said. The only change would be if you signed a 66W (applies to NSW) to waive the cooling off period.

        To the OP it sounds like there is nothing forcing you to buy here. I previously agreed to a price with vendor only to find out I didnt agree with the subsequent building inspection and could back oyt because I hadn't signed anything.

        And as others have said, the bank valuation is meaningless. It will be lower to reduce the bank's risk.

  • Almost Banned on 14/03/2014 - 01:07
    -1

    Yep, IIRC the Statute of Frauds requires that interests in land cannot be created entirely by parol, but can be merely evidenced in writing so formal contracts are not necessary.
    I understand your offer was by email. If it has been accepted in writing then I would think you are stuck.

  • ambidextrous on 14/03/2014 - 06:18

    thanks all

    Blaircam : no consideration has passed, nor contract signed or exchanged. only offer and acceptance. surely those two steps alone aren't enforceable?

    If the valuation is lower i may want the option to amend my offer. is this possible at this step?

  • StewBalls on 14/03/2014 - 06:33
    +5

    My plan is to see what the bank's valuation of the property is before I make a decision to pull out,

    Dumb move IMHO. Do not think for one second that a bank valuation is an indicator of the market value of a property; it is more often than not simply based on the minimum amount they think they can get for the property in a fire sale & still break even themselves if your mortgage goes tits-up!

    am I able to withdraw my initial offer

    Yes, at this stage you most certainly can…

    and offer a lower amount if the valuation is lower?

    Yes; however, at this point they will likely tell you to F-off…I would! ;)

    • ambidextrous on 14/03/2014 - 06:38

      thanks :)

      I am also considering an independent valuation as well to make sure

      I wouldn't make an amended offer purely for the sake of it. I have been doing a bit of research and suspect that there are a few lies from the real estate agent about past sales posted on realestate.com from the agent as the data isnt verified on the site its provided by the agent. We based our price offered partly on that

      • StewBalls on 14/03/2014 - 16:56
        +8

        there are a few lies from the real estate agent…

        Hey, on the plus side if there's only 'a few lies' then you're actually doing pretty well from a RE agent…IME they open their mouths & the bullshit just falls out! :p

      • Steptoe on 15/03/2014 - 15:54
        +2

        Check the sales data at onthehouse.com.au or allhomes.com.au which are government reported sales figures.

    • tshep on 14/03/2014 - 17:15

      A bank won't advise you of the valuation details - they pay for it and keep it private. Essentially if it is worth what you're paying it, the loan proceeds, if not you need to re-evaluate your LVR - they won't provide you the nitty gritty of it, or even the figure.

      • ShannonIngram on 14/03/2014 - 18:46
        +1

        This varies from lender to lender. Certain lenders do release the full report to you.

      • Cheshire Cat on 14/03/2014 - 19:02

        Lol. Plenty of banks do. And those that don't you can figure it out by enquiring about the 80% LVR to avoid mortgage insurance.

  • noyesmaybeok on 14/03/2014 - 06:53
    +1

    Look at onthehouse.com.au to see what the other units sold for, general trends etc

    • Eivad on 14/03/2014 - 11:22

      onthehouse, or house.ksou.cn - use both to cover your area

  • CyberMurning on 14/03/2014 - 07:48
    +2

    but if you back out during cooling off period you would lose 0.25% of your deposit,right?

    • derpdeder on 14/03/2014 - 09:09

      0.25% of the purchase price = $1000 per $400k of house in NSW.

      • cat06969 on 14/03/2014 - 09:23
        +1

        Tell the agent you're pulling out via cooling off period, and tell him you want to know what else he in particular has on his books as similar. No way he'll enforce the fee, if he thinks he'll have a sale somewhere else. Most agents don't enforce it as it reflects badly on them, as the client may be a future buyer of other properties via them.

  • Shadowsfury on 14/03/2014 - 07:49

    or oldlistings.com.au

  • backpaqer on 14/03/2014 - 07:59

    3 day cooling off period unless within 7 days of an auction is what I remember.

    • CyberMurning on 14/03/2014 - 17:56

      auction does NOT have cooling off

      • StrawberryCheesecake on 15/03/2014 - 18:54

        I think what backpaqer meant was that you don't get a cooling off period if it is within 7 days of an auction. As in, if the property goes to auction and is passed in, then someone buys the property through private sale, you are still not entitled to a cooling off period. Whether it is 7 days, however, I'm not entirely sure.

  • anna10 on 14/03/2014 - 08:16

    Does the 'subject to x' such as finance etc still apply? It seems worse case is lose the unit, but nothing else.

  • Eivad on 14/03/2014 - 08:23
    +2

    Hi, nothing is binding until you exchange contracts.

    Some contracts require you to provide a signed 66W - thay waives your cooling off period (eg if you bought a property prior to its auction owners will likely ask for a 66w).

    You can always back out of your offer - If you're conducting an independent valuation you can tell them to wait, but you face the risk of the property being sold to someone else in the meantime.

    • aggregate on 14/03/2014 - 09:13
      +1

      ^ this.

      You are in NSW. Unless you exchanged contract, what ever you made is not binding. A contract of sale looks like this: http://www.reinsw.com.au/ArticleDocuments/259/Contract_for_S…
      You need to have signatures for both parties on this.

      Once the contract is exchanged, you typically have 5 days cooling off period. You can back out your offer during the cooling off, but you lose the 0.25% deposit. If you signed a s 66W certificate, then you lose the cooling off period.

  • cat06969 on 14/03/2014 - 09:26
    +3

    For future reference, if someone's asking say 500k, make your first offer at 375k. You can always come up with a counter, but you can't come down.

  • [Deactivated] on 14/03/2014 - 09:31
    +1

    LOL… Don't rely on bank valuations - all they care about is the building hasn't burned down - or that there actually IS ONE at that address. Sometimes all they do is drive past and look out the car window! If there's a building there and your finance is pre-approved, that's enough for most to tick their box.

    Best to pay a Quantity Surveyor to value properties before making offers. (After comparing with similar properties, to make sure it's in your range to begin with.) You should still do this. You then submit that to the RE agent along with a more realistic offer, saying you thought the property was worth x, but the QS found y which reduced its value - and make the point that anyone else will find the same thing.

    Also learn to say, "Is that really the best you can do?" - then just stop talking and wait. The RE agent doesn't get paid unless it sells. And he knows what they'll accept. So he will often back-stab his vendor if it means quick cash in his own pocket. Just wait and if he comes down a little. Don't speak. Scratch your chin, look around like you have somewhere better to be. When he lowers the price ask it again. Silence from you again - look at your watch, etc. Make it clear you're not desperate - that you have an offer on another similar property and you're waiting to hear back. Keep doing this until he says it really IS the best he can do. But be prepared to walk away if it's not low enough. (If it's only $5000 over what the QS valued, you might want to pay it just to get the property - but that's now your choice - not theirs.)

    Watch their next dirty trick - agent says he'll take care of it but then calls back and says another offer for $10,000 more was made. Again be prepared to walk. They'll probably phone back in an hour and say the OTHER offer fell through, are you still interested at the price you previously offered?

    You can also alter the contract later with your own clauses. That is, you write on the contract with a pen any extra clauses you want. The contract goes back to the vendor and if they initial the change and sign the contract, the new clause becomes part of the contract. For example if an ancient water heater blows within 30 days of sale, or you find a septic system needs expensive repairs, they agree to pay/reduce the price by the cost to fix. Go read in some real estate forums to get ideas for clauses you should add (like somersoft & www.propertyinvesting.com).

  • ilostnemo on 14/03/2014 - 10:24
    +1

    I sold my own property years ago, and for $795 received a handbook with the necessary paperwork and some pointers to help me.

    The first step for me as a seller was to work a price out.

    After working out the price we were happy with we received one offer which was higher than our price.

    As we were nervous/excited I rang the rep and he said the first you need to do, is call the buyer and say to them you have accepted their offer.

    We aren't talking about buying a pair of jeans, sunglasses or a watch, we are talking about a $500,000 purchase.

    Off all the properties I've bought and sold, it's a very quick process. That is what all parties like. If you are judging you overpaid on the fact that the agent quickly accepted, then don't.

  • ambidextrous on 14/03/2014 - 10:47

    I did go in with a low offer which was initially rejected. From the analysis my partner and I did we valued it at slightly higher than we were accepted at.

    Even though we have acceptance I continued to research and think that based on my research we are about $25k overdone as i'm worried our initial analysis was wrong.

    There are two other properties in the block that apparently have gone for the same price as ours on real estate.com but i've found out that this data is supplied by the real estate agent and unverified to my knowledge

    • Eivad on 14/03/2014 - 11:28
      +1

      Check the neighbourhood properties at house.ksou.cn and onthehouse.com.au. They collate data from various real estate websites (eg realestate.com.au/sold) and input sold prices, dates, etc.

      Absolutely think this through before you exchange contracts. It's a huge decision, and one that is better made when you're not in a rush.

      As reiterated from above, just because they accepted your offer in an email/by phone does not mean you're in a binding contract to buy the property. Tell them you need time to think about it, if they start pressuring you to buy it immediately - hold your ground and don't give in to the pressure. Make sure your due diligence is done properly before signing.

    • ilostnemo on 14/03/2014 - 12:42
      +2

      You can't really compare what the other 2 properties went for unless they are identical ie same fittings and fixtures.

      I'm sure you can pay for reports which tell you the sold prices ie in WA you go through REIWA.

      Also what were the sales dates of the previous properties?

      It sounds to me you are rushing into it.

      My first house, I had the offer rejected, I said No problem I'll look for something else in my price range, 3 weeks later they call me back and asked me if I would reconsider, I said yes at the same price, 2 hours later the champagne came out.

      Do all your research first before making any offers!!!!

    • hoxygt on 14/03/2014 - 13:35
      +1

      Making offers well under list price is all well and good but if your in a reasonably 'warm' market you might find yourself missing out on properties and meanwhile prices are climbing.

      Do you research of course but no property is the same and in the $500k market $25k isn't a lot.

  • ambidextrous on 14/03/2014 - 13:28

    all the units are identical in terms of size and fixtures. The units were owned by one owner and now they are selling the units off. The last 2 sold in the last week of feb, one next to the unit we are looking at and the other one level down

    • ShannonIngram on 14/03/2014 - 19:02

      What the bank valuers are going to do is look at sales in the last 3-6 months that are verifiable and have settled. If the agent has only recently sold the other units (and they are yet to settle), I certainly would take that as an indication but be a bit wary of using that as your sole point of reference. Can you gain access to other recent sales data of other properties in the local area?

  • ilostnemo on 14/03/2014 - 14:03

    Ok, one thing to consider with units in a complex, is position.

    I've owned 2 units in complexes and always have chosen ground for the following reasons.

    1. Appeals to the elderly, ie No stairs of lifts required.
    2. Security, ie if your car is being broken into, you don't want to wait for the lift.

    Some also don't like the ground unit.

    1. Burgulars like ground units
    2. Views aren't usually the best.
    • donbot on 14/03/2014 - 14:37

      Cant agree enough.

      To add, top level units have pros/cons:

      Pros:
      1. View is awesome (or rather, can be if your facing the right way).
      2. Security - odds of getting broken into have to be lower than ground floor.
      3. Pretty much dont need a heater if a flat roof complex. Our place stays warm all winter without it.

      Cons:
      1. In a flat roof complex, you are the roof cavity. Tis no fury like a woman scorned, unless its a summer sun beating down on a flat roof all day. Aircon works, but coming home to a hotbox every, single, day is quite bleak throughout December to March.
      2. Nothing blocking the afternoon sun coming in if you have westerly facing windows. We have to have our blinds down from 4-7pm in the summer as the sun is just too fierce through big glass windows/doors out to our balcony.

      Thank god we're only renting!

      • ilostnemo on 14/03/2014 - 15:09

        We forgot, with the top unit, you don't hear any horizontal folk dancing.

        • strangeloops66 on 14/03/2014 - 16:49

          That's a pro, right?

        • bluedufflecoat on 14/03/2014 - 20:29

          No, it's not.

        • pmupsinep on 14/03/2014 - 21:24
          +4

          That's a pro, right?

          How can you tell? Could be their partner, friends with benefits etc.

  • andrewchk on 15/03/2014 - 00:21

    You definitely can just change your mind and let the agent know. Since you didn't sign anything, or pay anything. Even when the contract (without 66W)is signed and down payment has paid, you still have 5 days of cooling period.

    So just go ahead and tell the agent IF you really changed your mind.

  • headlessfly on 15/03/2014 - 13:20

    Depends on the terms of your contract.

    Most contracts will have finance and building/pest clauses as standard. Unless you chose to waive it.

    Usually people get a number of days to get building/pest
    And the finance clause usually allows the buyer to choose a lender of their choice. Look at the wording - if the finance clause is "finance through lender of buyer's choice, to the satisfaction of the buyer " then you can easily say you weren't happy with the finance therefore the contract lapses.

  • pebee47 on 15/03/2014 - 15:02

    1 In WA (and I am sure all other States) the Contract needs:

    A consideration ($$$),
    A date for the contract to be concluded,
    An agreement to buy, and
    An agreement to sell.

    The Offer and Acceptance document is just that. You offered $X, with a deposit of $Y, by a certain date: They accepted your offer. = Binding Contract. End of story. If you renege, they can sell at a lower price and you're up for the difference between that amount and what you offered

    If Agent is so lazy as to not race around and get $100 from you, part of the contract is incomplete. = No enforceable Contract.

    In your situation it may be that the Agent was sitting with the Seller discussing the property when your offer came through; the Seller accepted and the Agent immediately let you know (usually an agent will ring you, as soon as you answer and say your name, he/she will say "congratulations you have just bought a home", thereby indicating the agreement to sell). The person offering must be informed of the acceptance of their offer (before they change their mind and withdraw/amend the offer)

    Having said that, if you then come back with a lower offer, the Seller has already lifted their expectations, and may refuse to deal with you.

    Remember, in most normal sales, the Salesman is working for the Sellers. They pay the commission.

    • Ex Real Estate Representative
  • pebee47 on 15/03/2014 - 15:10

    Also with "valuations": Most Real Estate sites ? newspapers only show what people are asking, not what they sold at. Can be quite different!
    Companies like RP Data offer detailed breakdown of property sales for an area. Agents use these as the basis for their assessment of what the sellers property might/should sell for. (Agents don't give Valuations unless registered Valuers).
    I am unsure what data they sell to Joe Publick

  • Steptoe on 15/03/2014 - 16:19

    Are you buying as Owner-Occupier or Investment?

    By all means get an independent valuation and a building/pest inspection, and go back and haggle further based on the information you receive. I haggled further money off (after paying a small deposit as a sign of faith) when a building inspection showed structural issues that had been tried to be hidden (agent would have been aware, or even advised the vendor to do the cover up).

    If the numbers close to make sense just go for it. I think we all felt we paid too much at one time or another but you'll get over it. How much are your Saturdays worth?

  • ambidextrous on 16/03/2014 - 11:43

    it currently has tenants but we would look to move into it within 3 months of purchase as they are out of contract

    • Steptoe on 16/03/2014 - 21:37

      If there's any chance you'll utilise it as an investment property some day, I'd be looking at a I/O loan with 100% Offset.

  • AMLagonda on 22/03/2014 - 01:00

    Have you changed your mind? An offer isn't supposed to take long in the yes or no question.

  • ambidextrous on 22/03/2014 - 15:36

    hi all

    Thanks for all your advice

    Unfortunately our solicitor advised us not to go through with the purchase so back on the hunt again

    next time ill be more ruthless with my bargaining

    • eleana on 23/03/2014 - 15:59

      Hi ampidextrous,

      I'm looking to buy as well and I'm in Sydney too.

      Here is my story to share :

      I inspected a property with the asking price "XXX +", so I go ahead and made a verbal offer of the same amount XXX. The agent said they already had someone offered 40K more about an hour ago…..
      I want to say that the unit was a new listing and yesterday was the first open inspection. I called the agent and made the verbal offer about 3 hours after the first inspection.

      Is Sydney market this hot??? Will you believe what the agent said if you were me?

      Also is there any chance you can recommend your solicitor to me if your don't mind? You can private message me. I tried to message you, but you haven't switched on your message.

      Thanks,

      eleana

  • ambidextrous on 24/03/2014 - 21:36

    Hi Eleana

    My solicitor is a friend of the family, not specifically focusing on property law he is a commercial lawyer but had experience so could advise.

    As for real estate agents, I would be hesitant to believe what comes out of their mouths. If they could, they would probably sell their mothers.

    • eleana on 24/03/2014 - 21:53

      Hi ampidextrous, thanks for the reply :)

      If they could, they would probably sell their mothers.
      Couldn't agree more!

      Wish you all the best in the hunt!

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