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You may have noticed how competitive the property market has been since COVID stimulus packages triggered the biggest uplift we’ve seen in over a decade. We see frustrated buyers missing out on properties every day even when they are pre approved and offering above asking price.
Here are a list of practical tips from our finance and property specialists to help you secure your new home or investment:
1. Letter of Eligibility/Pre Approval
Contact us to obtain a letter of eligibility or pre approval letter. Agents often won’t present an offer unless your broker confirms your finance is ready to go. We’re you don’t need finance, you can get a letter from your accountant stating your financial strength and cash position instead.
2. Get us to call the agent
Get us to call the agent and give them confidence in you. We speak to agents daily and are experts in making you sound good. More often than not, this will convert to a successful offer.
3. Use a buyer’s agent
Use a buyer’s agent to hunt for properties and negotiate on your behalf. They are experts, know the real estate games and areas with growth potential plus they can also help you access off market deals to eliminate your competition. Ask us for a buyer’s agent recommendation.
4. Put a large upfront deposit for the contract
This shows your financial strength as a buyer and gives the seller confidence you can go through to settlement. For properties up to $1,000,000, around $20,000 is a good upfront deposit. Between $1,000,000 and $1,500,000, $50,000 would appear strong and above that level ideally you may need to consider putting down $100,000+. These deposits are included in your overall cash contribution and deducted of the settlement balance.
5. If you are borrowing 100%
If you are borrowing 100% and don’t have a large cash deposit to put down on the contract, there are ways to write the finance clause that make your offer look better. In the finance clause, you can either write a dollar amount you are borrowing, or the LVR you are borrowing. If you’re leveraging the equity in another property, you should write your combined LVR, not that your borrowing 100%. Eg. you have another paid off property worth $1,000,000 and are buying for $1,000,000 and need to borrow $1,150,000. Your LVR is 57.5%. That looks much better than writing 100% finance.
6. Know the sale patterns in an area
Review neighbouring sales to assess the selling pattern in the area and see what the days on market are. If the neighbours similar properties are listed ‘from $999,000’ but are consistently selling for $1,080,000 in less than 10 days, you know there is little point making an offer for anything under that as the competition is clearly high. We review market data constantly, if you’re unsure, reach out and we can provide you with the information.
7. Finance clause reductions
We’re seeing very few offers go through with 28 day finance clauses. The majority are a maximum of 21 days but if you really want to be competitive, have your pre approval sorted by us and offer a 7, 10 or 14 day finance clause. This demonstrates your confidence and strength as a buyer and will help your offer be presented as the fastest and best. A short finance clause is as close to a ‘cash’ offer as you can get.
8. Avoid subject to sale offers
You’re highly unlikely to be accepted in this market as you have an extra layer of complexity in your offer and sellers generally want fast settlements. Agents will present the highest offers with the least amount of conditions that can be settled quickly.
9. If you do need to sell to buy
Consider bridging finance instead of a subject to sale offer. You only need a standard finance clause in this circumstance and bridging finance can be approved in as little as a few days. In most circumstances in this market, we are finding that your sale property gets listed, goes under offer and sales are able to be lined up with the purchase and you never actually need to go ahead with the bridging finance but it makes your offer look much better.
10. Limit other conditions
In a bad market you can add all sorts of conditions, get furniture included and extend out settlement for long periods. What we’re seeing now is even building and pest inspection clauses can make the difference in an offer being accepted or not.
11. Don’t spend too long deciding
This is a fast moving market. Decide if you want to make an offer and do your sums before you even attend the home open.
We know how frustrating this market can be, and we genuinely want to see our clients win. If you need expert support to help you feel confident and competitive, get in touch with our Fortuna Finance team.
✉️ finance@fortunaadvisors.com.au
