May 22, 2020 by Flavio Corbanese
Making an offer on a property – things to know
Once you have found a property you like, it is easy to run straight to the Real Estate Agent to make an offer. When you do this the Real Estate Agents assumes you have done your homework! Have you?
Remember the Real Estate Agent is working for the seller and themselves – not for you. Never assume the contract you are signing, and all the conditions and clauses, are in your best interest
Pre-Approval:
Many people look at properties, online, even see what the repayments are, see they can afford this and make the Real Estate Agent an offer. Then when they make an application to a lender are advised they cannot get a loan. This is because whilst current repayment interest rates are at an all-time low, under 3%% (at the time this was written), the rate lenders calculate your interest rate is, in many cases, almost double that.
Making an offer for a property, some people say it’s like putting the cart before the horse. In other words, why would you not see how much you can borrow first, before making an offer. This way you know exactly what your maximum purchase price is.
Applying for a Pre-Approval does exactly that. What’s more, a pre-approval is good for 90-days in most cases. Towards the end of the 90-day period, you can apply for an extension.
What have you got to lose?
What should I be looking for in a contract?
Firstly, you should always sign a conditional contract, eg subject to acceptable pest inspection. This will allow you to walk away if there are major issues.
Secondly, a finance clause. In the event your application does not get approved. Even though you may have pre-approval, you may not get formal approval. For example, the lender's valuation may not come back at what you agreed to purchase the property for.
You should also check that any removable items are included in the contract especially if you want or need them eg dishwashers, fridges, curtains, floor coverings.
What time frame should I anticipate and include?
Most contracts are set at a five (5) business day cooling-off period. Your conveyancer can request up to 10 business days.
If you have pre-approval, this will allow ample time for:
- Your conveyancer to organise the various inspections
- The lender, whom you have a pe-approval with, to organise a valuation and provide you with “unconditional”’ approval
If on the other hand, you do not have pre-approval then even with 10 days, you may not get approval in time. For example: what happens if you are rejected by your first choice lender, you will then need to approach another lender meaning the 10 days will lapse. Hence the advantage of having pre-approval.
I’ve signed a Contract of Sale (COS) now what?
Immediately after you have signed the COS, send a copy to your conveyancer and a copy to your Mortgage Broker. The front page of the COS should be completed and signed by you. This is enough for the broker to organise the valuation and provide you with 'Formal or Unconditional' approval
Remember if you were not able to get a 10-day cooling-off period, the sooner you send the contract to your conveyancer the sooner they can apply for the 10 days.
By no means does this cover off all matters when purchasing a property, for example, how much do I need to pay to take the property off the market, I'm not sure how much I can borrow. This and many other questions is why you should start talking to a Mortgage Choice broker at either Narellan or Campbelltown before starting to look at properties, even if it is months away. Please contact us for more information
