How to decide what to offer on a house

When searching for property to buy, after you have found and inspected your potential purchase, the first thing you need to do is determine whether the property is worth the asking price in order to make a competitive offer.

Even in a sellers’ market, buyers need to determine the correct offer price in-order to successfully make an offer sellers will consider and one that doesn’t place financial stress on themselves.

To help you determine what that winning offer may be, consider the following:

1. Check your borrowing ability as well as capacity before making any offers. And remember, unless you are bidding in an auction, you don't necessarily need a pre-approval, however in a competitive market, it may give you an advantage.

2. Research all recurring costs, such as council and water rates, body corporate fees, insurance, etc. You can usually get these from sales agents, property managers, or sometimes from sales lists;

3. When shopping for investment purposes, call multiple property managers to ensure acceptable rental of the proposed property. It gives you the range the market is willing to pay for;

4. Calculate the estimated weekly, monthly and annual cash flow (before tax) for the proposed property and, if necessary, assess the risk at a higher rate;

5. Submit your bid price to the selling agent, and don't be overly disappointed if you don't secure the property - just move on to the next opportunity! And if you do happen to be the best offer, congratulations - the property is now in the contract stage. Time to finalise finance and order building and pest inspection (if applicable).

No matter how chummy the selling agent gets, remember, they represent the seller, so their interests are with them, not you. But they also want the deal to work, because if they can't sell the property, they don't make a living.

And of course, they want to sell at the highest possible price because they say they want to do the right thing from the seller (nothing to do with the highest possible commission). And on the flip side, as buyers, we want to buy at the lowest possible price.

So, the question is, how do you make it a win-win for you as a buyer and the seller? The key is whether you can get any information from the agent that can strengthen your position.

For example, when you ask why the owner is selling, the agent may say that the owner has bought elsewhere and therefore is considering selling their current home.

This means that there may be a time limit for the owner to sell the existing property to a new one, so that certain opportunities can be opened by negotiation (as long as both parties are reasonable).

Similarly, sellers can be free to negotiate if they have been sitting in the property market for some time, especially if the seller wants to capitalize on his investment or reduce his credit risk.

Once you determine a reasonable offer price and assume you have done all the due diligence checks, you should be able to make an offer that has a high probability of success.

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This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.