If you have been offering on properties and keep being beaten by cash-unconditional offers - then this week’s blog post is for you!
Just this week, we had a tender close with 30+ offers on the table, 8 cash offers, rest with conditions. From experience, cash offers almost always beat out an offer with conditions (even if the cash offer is lesser than the conditional offer)
So time to put your offers on the YIP Treadmill and lets get you competing like a PRO! Here are a few tips that we suggest.
1 - Do your due diligence
If you are buying a home for yourself and you have found that ‘special one’ to offer on - don’t sit around and expect the owner to let you have a pile of conditions, subject to LIM / Builders / Valuation / your mum seeing it / your dog seeing it / the Hurricanes winning this weekend / etc!
Take control, if you want the house, do your due diligence prior to offering and submit a clean offer with as little conditions as possible.
Yes it can be expensive to outlay a few costs - but consider the additional cost of renting should you miss out on another offer and have to go looking AGAIN for another home.
Side note: all serious sellers will almost always provide LIM & Builder’s reports - if you find yourself having to do your own due diligence - double check the seller’s motivation - they could just be ‘stingy/silly’ to not do it or they are probably not that serious about selling.
2 - Working Days!
Here is where I see people getting penalized the most! The main thing the owners will be looking for with conditions is how long you are going to spend to complete your due diligence!
No one likes waiting, and an owner waiting for you to confirm on a contract for 10 working days is not exactly appealing.
Typically building inspectors turn around builder reports either same day or next day. So depending on when you book them in you can work out your working days.
Before offering, give a few a call, book one in ready (should you get the offer)
The same applies to private valuations, they also usually do same / next day service.
LIM Report can take up to 20 Working Days (you have the option to pay a bit more and have it fast tracked as well - just ask)
With Finance, you are best to approach your bank around it, and correctly calculate what is necessary, it may be the bank requests one of the above reports - in which your finance condition time-frame should reflect that.
3 - Being Strategic With your Deposit!
Firstly, where does the deposit go should you win the house? It goes to the Real Estate Companies Trust Account and it is held there until the house settles - in another words, the deposit is primarily for the benefit of the agent (so that we get paid our commission out of that deposit - with the remainder being held in trust for the security on the sale)
Depending on the agent, knowing the above fact will allow you to change your deposit to an amount that gives you maximum ability to reduce your finance condition.
For example, if you have 5% deposit ready to go, but need another 5% from kiwisaver, you could potentially adjust your deposit clause to be 5% and not need to have a finance clause that waits for kiwisaver to release funds (if it has been preapproved)- potentially cutting out weeks off your finance clause days) - just make sure your settlement date gives you enough time to have your Kiwisaver clear.
It is obviously much better to have a 10% deposit in place, but if it is a choice between 20 working days for finance at 10% deposit or a few working days for finance at 5% deposit - I surely know which one most owners would prefer.
4 - 20% vs 10% Mortgages
Recently we helped a buyer get into a home, they were on the cusp of the 20% mortgage. There is a lot of cons going down to a 10% mortgage, higher rates, less bonuses, need for reports / valuations (ask your mortgage adviser for more info)
So in the end, they dropped their price to where their mortgage will be a 20% deposit one and went in as a cash offer (as they didn’t need to get a valuation, etc then) - needless to say, they submitted a good unconditional offer and beat out other offers with conditions.
The above would work, only if the price at 20% would be within appropriate market value - so discuss this with your agent / mortgage adviser.
I personally hate maths, but you will find that you will be far better off financially if you can purchase a home within a 20% deposit mortgage.
5 - Making the most of your building inspection!
Building inspections have become a highly recommended part of the buying / selling process - But did you know that almost all building inspectors will allow you to do a walkthrough with them?
There is probably no point in following them around while they are doing the report, but ask if you can pop by near the end and they can have a discussion about the property with you! Particularly if you are the kind of person that prefers not to trawl through 100 pages in a report.
Also - you can pay a small fee to have the name on building report that is provided by the owner to be changed to yours when you buy the house. That way you have a document that belongs to you (in your name) should any surprises come up.
Every buyer has unique situations, so it is best to discuss this with your trusted / knowledgeable agent. If you are in Wellington… you know who to call :)
Have a great weekend everyone!
William YIP
Award Winning Agents - YIP!
william.yip@collectivefn.co.nz Licensed under REA 2008