Ever wondered about how to establish the price you’re willing to pay for a home?
You may not have. You need to purchase a home, in the back of your mind you have the amount you can spend and you know the area you want to look in. So, you jump in your car and view houses, only to be very disappointed in the outcome.
Let’s look at a technique that could take the sting out of the situation. Your first port of call should be to contact your estate agent. They have all the facts and figures and can introduce you to established financial institutions, bond originators and contractors such as builders, electricians etc. They will take you through the whole process of market availability in various areas, deposits, transfer duty, legal fees, the transaction period and any other contingencies you may encounter.
With a good idea of what expenses you are in for, it is a case of checking your budget. Perhaps it can be a cash sale. You may need to sell your current property or you might be able to afford an additional loan without having to sell your present home first.
With your financial situation simplified, it is always an excellent idea to be pre-qualified. This gives you a head start with regards to price range. Remember, when purchasing a home you must have a definite figure which you are willing and able to pay for the home of your choice. This will also include a budget for any alterations.
You may find the asking price for a property is not as negotiable as you originally thought. At this point, you will have to bring yourself back to reality and reassess the situation. Is the amount being asked relative to the neighbourhood and to the market cycle at that given period? What alterations are required and what are the costs? Compare it to other homes for sale in the area - could they be bought cheaper to allow you to spend more on making the home suit your lifestyle?
This assessment should bring you to the point of making an offer. The offer should fairly reflect current and expected market conditions and should be reasonable. You do not want to open the door to negotiation and you do not want to insult the seller (who was advised on the price at which he has listed his home). A seller can only expect that negotiations will take place if he has insisted on listing his home at a higher than average price. Walk away if the seller is unreasonable.
Your offer to purchase is an important document. It states exactly how you are going to pay for the house. A large deposit with no 'subject to' clauses can positively impact the acceptance of a lower offer.
The usual deposit requirement is between 10% and 30% of the sale price. Thereafter, the balance of the funds may come from a savings account, a bond and/or the sale of another property.
The offer may include requests for an inspection of the house or certain land reports. A feasible period for all this to be accomplished must be stated in the offer for consideration by the seller.
On receipt of the offer, the seller may respond with a counter-offer. It is then up to you to assess the situation, based on the advice you receive from your real estate agent. If the counter-offer is reasonable and is still within your range, you should have no problem agreeing to the terms.
Once both you and the seller have finalised the terms of the offer, your attorneys will ensure that all requests are followed through in the specified periods of time and that guarantees are issued by financial institutions.
There you are – it’s a very simple procedure that takes the emotion out of the deal and allows you to work within your financial framework and establish the “right price” for your next property.
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