Keep a cool head in the heat of a multiple-offer battle
Thursday, 22 January 2015, 15:00
PROPERTY NEWS - Even though there has been much more activity in the property market lately, prospective buyers are extremely value conscious and are virtually ignoring any home they think is overpriced, while zeroing in fiercely on those properties they think are correctly priced.
"In fact," says Lew Geffen, chairman of Sotheby's International realty in SA, "their attention is so focused that the sellers of well-priced homes are once again starting to receive multiple offers to purchase – a market phenomenon that has not been in evidence for the past five or six years.
"And of course this is a good scenario for serious sellers. The banks are still being very careful about granting home loans, and it is great to have a 'back-up' offer in hand if the first buyer's bond application should fail. It is also useful if the first buyer's offer was subject to the sale of an existing home and that sale does not materialise in the time allowed."
However, he says, a multiple offer situation can be stressful for prospective buyers, so there are a few things they need to remember, the most important being that it is not always the first or the highest offer that is accepted.
"There are always two things that matter to a seller – price and terms – and both are open to negotiation. If, for example, the sellers have received a higher offer that is subject to the buyers being able to sell their own home, they might well accept a lower offer that is non-contingent, depending on how quickly they themselves would like to move.
"Speaking of which, a particular seller may also have a special need - perhaps a really quick exit so he or she can start a new job elsewhere without having to worry about a lot of small repairs, or perhaps a need to stay in the home until a school term finishes – and buyers who are willing to be flexible on such points can often cinch the deal without having to offer the highest price."
But in the current market, Geffen says, the offer most likely to appeal to sellers is one that comes from a buyer who has taken the time to obtain proper home loan pre-approval (not just pre-qualification) and has cash in hand to meet any deposit requirements and the purchase closing costs, such as transfer duty, bond registration costs and legal fees.
On a cautionary note, he also says buyers should take care not to get carried away in the heat of a competitive situation and increase the amount of their offer without giving it some serious thought. "Bearing in mind that the banks are still valuing properties very conservatively, they might not obtain a home loan for a higher amount, even if they can afford it.
"And on the other hand, increasing the price offered could affect the buyers' ability to pay the deposit and transfer costs, and could also result in higher monthly loan repayments that could have a long-term effect on their lifestyle."