Buying Real Estate in Australia: the Offer Process

When buying a property in Australia or New Zealand the usual agreement is by “private treaty” when the buyer makes a written offer and the seller either accepts, rejects or counter-offers.

When a written offer is presented to an agent it is usual practice for any other interested parties to be contacted so that all offers can be presented to the seller together. Although the agent is obliged to present the offer as quickly as possible, the agent also has an obligation to inform the seller of any other potential offers. Normally what happens is that the agent “calls interest” giving all other agents in the agency a few hours to get any of their prospects to make a written offer. Beware that your initial offer may be your only chance and that a low-ball offer may be unofficially outbid. Now this does not necessarily you should make your best offer or an unconditional offer but think before you act.

What you should do with your offer;

• present it on the standard Real Estate contract form of the state that you are in
• make it conditional on approval of title by your solicitor within X days
• make it conditional on finance from lender of choice within X days
• make it conditional on any building or pest inspection report you want to have done (or is required by your lender)within X days

In fact you make a contract conditional on anything: e.g. make it conditional on your wife viewing it and approving it. You have to be reasonable though: either she views the property and vetoes it or she doesn’t view the property and agrees anyway. Once the contract is agreed to by both parties you have to work to make sure the conditions are met or you waive them.

All of these conditions are normal and most buyers won’t have any concerns agreeing to them so long as the time requested is not unreasonable. Avoid having a lot of conditions though and then offering well below the asking price. Most properties sell for less than asking price in today’s market - but they don’t sell for say 20% below. If you are being cheeky make sure your offer is “clean” i.e. very few other conditions.

An offer doesn’t automatically lapse unless you put a condition in - along the lines “that this offer expires on 20 August 2008 @ 4:00pm” - which can be useful if you want to make multiple offers on different properties within a limited timeframe.

Remember that the agent works for the seller not the buyer; don’t expect the agent to negotiate on anyone’s behalf except his own and possibly the seller’s. The agent wants a sale no matter what, if the property doesn’t sell he won’t be paid. What price the property sells for doesn’t make a lot of difference to his total commission so he is going to be working hard to get the two parties to agree. Don’t let the agent know what your best offer is - until you offer it and then be very clear that you are prepared to walk away at that point.

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