Welcome to Part 8 of our series of tips to help first home buyers navigate the complexities of the real estate market. In this installment, we delve into the intricacies of making offers, understanding the cooling-off period, and mastering the art of bidding at auctions. Each of these stages presents its own set of challenges and opportunities, and knowing how to effectively manage them can significantly impact your home buying experience. Whether you’re considering a private sale or preparing to face the competitive atmosphere of an auction, these tips will equip you with the knowledge needed to make informed decisions and strategise effectively. Let’s explore these crucial aspects to help you secure your first home with confidence.
Tip 28: The offer is about more than the price
When you make an offer for a property (whether it be a bid at auction or offer for a property for private sale) the price might be the focus but there are other elements to consider including; the deposit to be paid, the settlement term, legal review of the contract, building inspection and any other conditions you might require.
At an auction these other terms need to be understood, and if necessary, negotiated in advance. For example the standard deposit is 10% at the time of signing the contract so if you are offering less you need this agreed beforehand. Along similar lines, if the vendor is proposing a 60 or 90 day settlement and you seek 30 days or perhaps 180 days then this needs to be agreed before the auction.
It is also important to understand that at auction you cannot include conditions that make the purchase “subject to” other things such as a building inspection or finance. All bids are unconditional. So you need to do your due diligence in advance and that can mean spending money when you are ultimately not successful in buying the property.
In the case of a property for private sale, it is open to make an offer subject to conditions. While it is not a commonly accepted term, I recently saw a purchase that was subject to the sale of a property owned by the purchaser. More commonly, offers are subject to finance.
While adding conditions, usually offers protection for the purchaser but it does make the offer “weaker” so that a vendor might accept a slightly lower offer with no conditions (meaning a certain sale) over a conditional sale at a higher price (that might not eventuate).
Tip 29: The right to a Cooling Off period
In Victoria, the sale of a property is subject to a 3 day cooling off (subject to one exception). This means that within 3 days of signing a contract of sale you can withdraw from the sale.
To exercise your right you need to provide written notice to the vendor (vendors agent) and you are entitled to a full refund of any deposit paid less the greater of $100 or 0.2% of the purchase price ($2,000 on a $1m purchase price). Typically agents will give purchasers a full refund.
There is one significant exception to the Cooling Off rule. The rule does not apply where a property is sold at auction OR within 3 business days of the appointed auction date.
So if you make an offer in the last few days before an auction or just after you need to be aware that you do not have a cooling off period as a right.
Tip 30: Bidding at Auction
A few tips to help you as you compete with others at an auction:
Attend a few auctions before you start bidding yourself
Watching a few auctions before you jump into the action will help you to be more comfortable and know a little more about what to expect. It also gives you a chance to see what other bidders do well (or not) when it comes to tactics.
Set a limit before the auction and stick to it
So before you get to an auction you need to really clear what is the maximum price you can afford and what you will bid up to for that property. Then you just need to stick to it. It can help to have a friend or partner with you to hold you to account.
Never set your limit at a round number
When you are setting limits it is easy to select round numbers as our limit. Just like most other bidders. So you will increase your chances of being successful at auction if you select an odd number for your max bid.
If you are thinking that around $700,000 is your max price then if you can stretch to $703,000 or $707,000. This way if another party reaches $700,000 before you that might be their last bid but you are not yet out of the auction.
Bid with confidence
You can achieve this with lots of different bidding strategies but basically the message here is that there is some theatre to auctions. Your competitors are watching you and looking to “read” your every bid/non bid and your body language. So keep that in mind at all times, you might be uncertain or near your limit but the only person who should know that is you. If your competitors sense these things it may keep them bidding when they might otherwise stop.
My personal preference for bidding strategies is that once the auction is moving, bid steadily and with confidence (even consider bidding quickly) right till you reach your limit. Increasing bids by $500 or having long internal discussions about whether to make another bid suggests you are near your limit.
There is value in being the highest bidder when a property is “passed in”
If a property does not reach its reserve price and is being passed in then the higher bidder at that stage will have the first right to negotiate with the vendor to the exclusion of everyone else.
Navigating the property market can be a daunting task, especially for those stepping into it for the first time. This series has aimed to provide valuable tips to help first home buyers understand the finer points of making strategic offers, leveraging cooling-off periods, and bidding confidently at auctions. By applying these insights, you can enhance your ability to make informed decisions, negotiate better deals, and ultimately find the right home that fits your needs and budget. Remember, every step you take is a learning opportunity that brings you closer to securing your dream home. Stay informed, stay prepared, and use these tips to navigate your home buying journey with greater ease and success.
We hope you enjoyed our tips to help first home buyers get the deal done. For more useful tips for first-time buyers, check out part one of our 30 tips For First Home Buyers here, part two here, part three here, part four here, part five here, part six here, part seven here, and our First Home Buyer page in the knowledge centre here.
