Offering to buy a property is a lot like playing poker. If you have a pair of twos, you’re going to lose to four aces. So you need to give yourself all the advantages you can.
In this article, we’ll give you some tips for improving your offer to give you a better chance of getting the property you want.
Subject to sale offers
If you need to sell a property so you can buy another one, your offer will be ‘subject to sale’. But if you’re in competition with a cash offer and an offer that’s subject to finance, you’re going to come in third!
This is where a good finance broker or bank manager can come in handy.
If you have a strong track record financially, the bank may lend you the entire purchase price for the new property. Then, when you sell your original property, you’ll reduce the mortgage on your new property by your sale proceeds and continue with a smaller mortgage.
Any interest rate charges while you own two homes will be added to the total loan amount and you’ll pay them off over time with the mortgage. So this won’t affect your finances too much.
Now you’re in the running because you have an offer subject to finance rather than subject to sale.
Many lenders call this a ‘home to home’ loan.
Making a cash offer
A cash offer is the ultimate offer for the seller because it gives them security. An offer subject to finance can always fall through.
Therefore, offering cash can be the difference between having an offer accepted or not. A seller might even accept a lower offer if it’s in cash.
The key to making a cash offer is to get pre-approval of finance.
A lender will analyse your financial capacity and, if they like what they see, issue a pre-approval letter. This might take several weeks, so do this as early as possible.
Most pre-approval letters are subject to two conditions:
- Nothing will change in your circumstances, such as losing your job.
- The bank will accept the property valuation (i.e. the collateral is sufficient for the loan).
This means you may be able to offer cash but ‘subject to an approved valuation by the bank’. This might just be enough to give you the win!
Want more help?
If you need more advice on buying and selling property, contact Alan Bourke or anyone from Bourkes on (08) 9474 2000.
