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20 min read

Making an offer on a House Below Asking Price [2024 update]

Learn the exact steps in making an offer on a house in this guide.

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So you have found a home you want to buy, but the asking price is higher than what you are willing or able to pay. Can you make an offer below the asking price? Making an offer on the house below the asking price is a great way to save money, but it requires some consideration and negotiation. In this article, we will show you how to make a (successful) offer on a house below the asking price.

In fact, the tips in this post have helped over 1000 others go from renting to buying. With the right approach, you can make a great deal that you’ll be happy with for years to come!

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Let’s dive in.

Table of Contents

1. Check Out Recent Sales.

Look, there are literally hundreds of great free property research tools out there, and you can go down that rabbit hole of trying to research other properties that have recently sold.

But at the end of the day, only 3 things matter when finding recent sales:

  • The property being compared should be within 1 km of the property you want to buy
  • It was sold within the last 6 months
  • It is similar to the property you wish to value (i.e. same bedrooms, bathrooms, block size)

Keep things as simple as possible, and either ask your Mortgage Broker for an RP Data Report or research yourself using the RealEstate website.

To check out the recent sales on RealEstate, you need to follow these steps to find similar sales…

Or spot the odd ones out.

odd one out property
  • Step 1. From the front page, enter the suburb you are looking to buy, the type of property and filter for your target price range.
  • Step 2. Sort from Newest to Oldest: This will help you find sales that have happened in the past 6 months, which the banks will consider similar.
Make an offer below asking price
  • Step 3. Make a list of properties, the address, sale date and bedrooms.
  • Step 4. Review your list of properties to make some further comparisons.
 

Type

Bedrooms

Bathrooms

Price

Date

5/12 Dorset Street Ashgrove  

Townhouse 

2

1

$615,000

13/02/2023

353 Waterworks Road, Ashgrove

House 

4

3

775,000

27/01/2023

1/36 Celia Street, Ashgrove

Townhouse 

3

2

$800,000

16/01/2023

89 Wardell Street, Ashgrove

House 

3

1

$783,000

21/12/2022

3/51 Dalmore Street, Ashgrove

Townhouse 

3

2

$705,000

04/08/2022

To further make sure that you are making the correct comparison, keep the following in mind:

  • Quality. The quality of both properties should be the same if you want to make a fair comparison.
  • Rooms. The sold property should contain the same number of bedrooms, bathrooms, parking spaces etc.
  • Land Size. Find out if the land size of a sold property is similar to that of the one you wish to buy
  • Location.If the property’s location is the same distance from amenities like shopping malls or transportation facilities, and if the streets look the same.

If you were buying a 3-bedroom house, you would remove any recent sales with 1 or 2 bedrooms as they wouldn’t be considered comparable.

In other words, the sales at 5/12 Dorset Street, Ashgrove and 353 Waterworks Road, Ashgrove, won’t count when compared to a 3-bedroom home in the same suburb because one has 2 bedrooms and the other has 4 bedrooms.

Based on the other sales, you could expect to pay between $705,000 and $800,000 for a 3-bedroom home in Ashgrove.

Keeping these factors in consideration will help you compute the right price and ensure that you are making the right offer.

2. Ask The Agent Lots Of Questions

Here’s the deal, the Real Estate agent’s top priority is to sell the property quickly for the highest price possible. In other words, the agent doesn’t get paid by the hour, so in their eyes, a quick sale is a good sale.

Asking the Real Estate agent lots of questions can help you understand the seller’s motivations and know how to make your lower offer stand out in a multiple-offer situation.

To get an understanding of the seller’s motivation, ask the following questions:

  • Why does the seller want to sell the house?

This is the first question you need to find the answer to. There can be several reasons why a seller wants to sell the property. They might be an investor who bought the property for resale purposes, or they may be under pressure to sell the house. If it is the latter, you could be in a better position to negotiate the price. For example, if the seller is going through a divorce, they might want to get rid of the house as fast as possible, so they don’t have to keep interacting with their ex, and you can use that to your favour.

  • How long has the property been on the market?

This is another crucial question you need the answer to if you want to make the right offer. If the property has been listed for over 6 to 10 weeks, there is a good chance that you can make a lower offer, and it will be accepted. Besides, properties that remain in the market for over 6 months are usually not priced realistically. Sometimes the sellers place an unrealistic price expectation, and the value placed on it is higher than the market value, but they refuse to accept a low offer, making it overpriced.

Selling a property can be just as stressful as buying one, especially in a softening market.  Let’s put ourselves in the seller’s shoes for a moment:

Fear of losing out. The sellers have probably seen recent sale prices and have expectations. If the market slows down, the sellers worry they won’t get the price they desperately want or possibly need.

Time pressure. If they’ve already bought another place, they might need a quick sale to finalize their finances. Every week the property goes unsold adds to anxiety.

Reputation. It’s embarrassing when a property lingers with that ‘For Sale’ sign for ages. Neighbours start asking questions, and potential buyers sense your desperation. Now, we are not saying you should exploit the seller’s weakness. But understanding the anxieties can help you tailor your approach. 

Expert Tip:

At an open house, don’t just look at the house; look at the seller hanging out with the agent. Are they hanging around awkwardly? This could be a sign that they’re eager to sell. Are they standoffish? It could mean they’re more open to lowball offers.

Read More: 5 Questions to Ask a Real Estate Agent

3. Complete Your Inspection Checklist

When it comes to purchasing a home, there is no substitute for physical inspection. It allows you to see other attributes you would have otherwise ignored while searching for a property online, such as its locality.

how to buy a house inspection checklist

Whenever you plan to visit a property, also plan a building and pest inspection before making a purchase, as it will disclose the problems beforehand that would otherwise be costly to fix.

Note: Do not use the real-estate agent-recommended inspector. Remember, the real estate agent is working for the buyer, not you – which means there is a possibility that the inspector they recommend may be biased. So, whenever possible, get your own independent building and pest inspector.

Download: Property Inspection Checklist

4. Get A Second Set Of Eyes On The Home

Two pairs of eyes are better than 1 when it comes to property.

Picture this:

You go to the 4th property inspection on a Saturday. Finally, you find the right place, on the right street, at the right price. 

excited people buying home
You found the right house, have taken the appropriate number of selfies out front and are ready to sign on the dotted line…

You get swept up in the excitement and are ready to sign the contract then and there…

And we can guarantee you will miss details about the property, even if you are following the Property Inspection Checklist.

The second set of eyes will prevent this.

you see i see home buying
A second pair of eyes can prevent you from buying a complete dud of a property.

Whenever I have wanted to buy a property, I’ll always bring a friend or someone from my family to provide a second set of eyes and give a third-party opinion.

As much as you might love a home, you have to remember that one day you will want to sell, and “really unique” in your eyes could be “really ghastly” for someone else.

5. Grab A Copy Of The Contract (and get the conditions right)

The first thing you should do is get the conditions of the contract right. This is a very crucial step as it enables you to be well-prepared before making an offer on the property.

contract-of-sale-fhog
This is what a standard REIQ contract of sale looks like in Queensland

Price is the first thing you need to consider. Decide on what you are willing to pay for a house and how much deposit you can invest in the beginning. It helps you identify the type of properties you should be looking for and the areas where you should focus. Determining the price you are willing to offer will set the base for the next step. 

Then comes the clauses of a contract. You should know the clauses you want to include in the agreement, especially the ones related to pest control, building inspection and finance. 

Bear in mind that the more attractive your offer is, the higher the chances that a vendor will accept it. However, just because someone offers the highest price doesn’t mean the seller will accept it…

There are several other things a seller considers when selling a property, and once you understand these things, you may be able to offer a lower price and still get accepted.

For example, some sellers prefer buyers who are willing to pay in cash or someone willing to offer a long-term settlement because they don’t want to move out for a certain period of time.

Talk to your real estate agent about what a seller is expecting, as it will help you make a more attractive offer and enable you to buy below the asking price.

6. Find Out How Fast Your Loan Can Be Approved

The conditions of your contract can make or break your offer. As we mentioned, some sellers may want a quick settlement, so having your finance in order will allow you to offer below the asking price as long as you are offering a faster settlement.

Having a great mortgage broker on your team can help reduce the days it takes to get your finance approved, making your contract much more competitive.

Get your finance approved quickly
A good mortgage broker will get your loan approved in time…

A good broker like Hunter Galloway can help you get your loan approved in under 14 days.

Read More:  What is a pre approval?

7. Making An Offer On A House Below Asking Price

Making an offer below asking price

It’s showtime! This is what this article has been building up to – making an offer below the asking price. You’re ready to make an offer, but thinking about making a lowball offer first. In other words, you are thinking about making an offer for a fair bit less than the property is worth)

It is important to remember that whether or not your lower offer will be accepted also depends on the current property market cycle. In order to determine this, you need to use the Property Clock.  This is an awesome tool because it captures how real estate works. All property markets follow the same overall cycle.

In a booming market, prices are rising, properties sell fast, and competition is fierce.

In a Slowdown, growth starts to level off, and it takes a little bit longer to sell.

In a recession, property prices can drop, and there’s more stock than buyers.

In recovery, things start to pick up again, but slowly.

Now, there’s a quick caveat here. All markets follow the same overall cycle but don’t follow it at the same time, and they don’t spend the same amount of time in each quadrant of that cycle. Some cities might stay in a rising market for years, while others will have a shorter rise and be there for months. It all depends on the underlying supply and demand. But using this tool is a great way to get a snapshot of the market you’re currently in.

National property clock can help you make the right offer
Source: https://htw.com.au/month-in-review/

Let’s take a look at some examples. Brisbane houses are currently in the rising phase of the property clock. It’s a similar story in Melbourne, Adelaide, Perth, and Sydney. Canberra and Darwin look to be at their peak, and Hobart is starting to recover.

How does this information help you negotiate for a lower price? Your negotiation strategies should be very different depending on the stage of the property cycle your target market is in. 

If you’re buying in a rising market or one at the start of a recovery, you don’t have a lot of room to negotiate on the price. In these markets, you need to make a strong offer, probably even a bit above the listed price. However, if your market’s in a peak or a decline, then you have a bit of room to maneuver and can make an offer below the asking price.

What is considered a lowball offer?

A lowball offer is a real estate term meaning an offer that would be way below the sellers asking price, or what they were reasonably expecting to sell the property for—based on the current market.

Your offer is really going to depend on the research you did in the steps above and at what stage the property market is in. If the sellers are asking way more than you think it’s worth, you could make an offer to feel them out.

How Low is a Low Offer?

The average vendor discount (the difference between the original asking price of a property for sale and the eventual sale price) will depend on the suburb and can range from 5% to 10%. In other words, there is nothing wrong with offering between 5% to 10% below the asking price.

But we have seen people get as much as a 25% discount on less desirable properties in a slow market.

Sometimes a lower price, with sharper finance terms (for example, 7 days for finance), can help you seal the deal…

8. Put An offer In Writing.

You should always put your offer in writing to make it more effective. In Queensland, you are required to present all the contracts in writing.

Making an Offer on a House 1

If you do not make an offer in writing, it may still get accepted, but there is no guarantee that the seller will honour it. To be sure that the offer is processed, put it in writing.

Real estate agents will draw up the offer, but always remember that they represent the sellers, not you. Therefore, hire a conveyancer who can check your offer before you send it out to a seller.

When putting your offer in writing, DO NOT write a love letter. The last thing you want to do is tell the owners about all the things you love about the property and how you see your family growing up there and growing old. There may be stories out there where people have used this technique, and it has worked. But in most cases, if the vendor or agent knows you have fallen in love with the property, they will use this against you and make you pay an absolute premium for the property – so you can forget making an offer below the asking price.

9. Think About Your Counter Offer.

If you want to make an offer below the asking price, devise and follow the right negotiation strategy.

Keep the Counter Offer into Consideration

It is quite likely that after you present your offer through your conveyancer or real estate agent, the seller might give a counter offer. In that case, take their offer into consideration.

Making an Offer on a House 3

Figure out if you want to accept the offer or want to make another offer to the seller. Be very careful with the timing of this, though. Try not to delay your decision-making process, as the seller might sell the property to someone else.

Pro-Tip: If possible, let the seller come up with the price instead of making the offer first. This will give you a clear idea of what the seller is expecting and how much you can negotiate.

For example, if you make an offer to purchase the house at $600,000 when the advertised price of a house is $650,000, but the seller was willing to sell it for $550,000, you will end up losing $50,000 that could have been saved had you not initiated the offer.

Read More: Negotiate the House Price with a Real Estate Agent [Step-By-Step Guide]

10. Ask About The Cooling-Off Period

In most cases across Australia, you get a cooling off period after you have signed the contract. This means you get a few days to cancel the contract if you change your mind.

The big BUT to this is if you buy a property at auction

There is NO cooling off period when you buy at auction.

Ask the Real Estate Agent or your Conveyancer if you receive a cooling off period because, in some situations, if you pull out from the sale, you can lose your deposit – unless you have included the subject to finance clauses in the contract.

first home owners signing contracts
There are a few small things you need to know when signing a contract of sale.

Victoria Contract of Sale

According to The Instrument’s Act 1958, a contract of sale is not binding unless it is “in writing signed by the person to be charged or by a person lawfully authorised in writing by that person”. What this simply means is that a verbal agreement is not binding.

Before signing a contract of sale, the seller is bound to provide the potential purchase with the seller’s statement. Both parties sign each contract’s copy and exchange it through a real estate agent. The cooling off period in Victoria is 3 days. Bear in mind that the cooling off period begins from the date you sign the contract, not from the date the seller signs it.

New South Wales Contract of Sale

In New South Wales and Sydney, you cannot sell a residential property without signing a contract of sale. Many changes have occurred in these states. For example, a seller of a strata scheme or a single freehold must also provide a valid non-compliance certificate, an occupation certificate, and a valid compliance certificate.

Moreover, the vendor and purchase are under no obligation to honour the contract until they exchange signed copies. These copies can be exchanged in a face-to-face meeting or via mail. The cooling off period in New South Wales is 5 days. 

“However, the cooling off period can be waived, reduced or extended by negotiation”. This means that if you and the seller agree, you can skip the cooling off period completely or extend it.

Queensland Property Contract of Sale

In Queensland, the buyer signs the contract first, and the seller only signs it if he accepts the offer. It becomes binding only after the buyer receives an acceptance notification. The cooling off period is 5 days and starts the day you receive a copy of the contract signed by both parties. If the contract is signed on a weekend, the cooling off period starts on the next business day.

If the buyer terminates the contract during a statutory cooling-off phase, they will be bound to pay a penalty of 0.25% of the purchase price. Therefore, it is advised that you should do a property valuation independently and seek legal advice regarding cooling-off rights and the contract before signing a contract.

 It is important to note that in Queensland, only lawyers can act as conveyancers.

South Australia Contract of Sale

In South Australia, a seller is bound to provide the buyer with a Form 1 Disclosure statement before signing the contract. After both parties sign the contract, they are bound by its terms and conditions. The cooling off period in South Australia is 2 days.

Remember: There is no cooling off period if you are buying at Auction.

Read More: What else does the Contract of Sale Contain?

11. What to do when your offer has been accepted

Yeehaaaarrrrrrr! You got the phone call from the Real Estate agent to let you know your offer has been accepted!

 

…But what now?

From here, you just need to follow the simple 3 steps in the home buying process:

In Queensland, when buying a house, you are liable for insurance from 5 pm after signing the contract of sale.

So you need to take out home insurance to get protected.

At this point, you also need to get in touch with your Mortgage Broker to get the home loan approval rolling. They can help you manage the process now and make sure you secure that shiny new home!

Read More: 21 easy steps to find the best mortgage broker.

Requesting a finance extension

What happens if your finance takes longer than expected? There is no need to panic. As much as it might seem like a MASSIVE problem for your finance to take longer than expected to get approved, Tom Astill, from Astills Lawyers, believes it is a very common occurrence for buyers in Brisbane.

“We are seeing finance extensions being requested in over 50% of our purchases at the moment”, Tom said. “The banks are taking longer, which the vendors are happy to accommodate and generally are fine with providing an extension to finance.”

 

making an offer below asking price

In other words, requesting an extension on your finance clause is very common, so don’t worry! All you need to do is send an email to your conveyancer asking for an extension which they will request from the property seller.

Are there any penalties for requesting a finance extension?

No, there is no penalty interest or other issues when requesting a finance extension. Worst case scenario, if the seller rejects your finance extension request under standard REIQ contract terms, your deposit will be fully refunded as long as the termination is lawful.

Either way, speak with your solicitor, and they can negotiate an extension for your finance due date.

Read More: 27 ways to get unconditional approval.

Start Planning the settlement.

In Queensland, when you signed your contract of sale, you specified your settlement date. Settlement is usually 30 days from the contract of sale.

For example, if your contract of sale was dated 1st November, then the settlement date will be 1st December. If the 1st of December falls on a weekend, then settlement will fall over the next available business day.

If settlement falls due on a Saturday, then the following Monday will be the settlement date!

Also, book a time for your pre-settlement inspection

You are allowed one final inspection before settlement to check out your new home. It is important to do this inspection to make sure there haven’t been any changes made or rubbish dumped in the backyard since you signed the contract of sale.

A few things to look out for are:

  • Any major damage to the property 
  • Double-check the inclusions and exclusions, like the dryer or dishwasher, and make sure they are still working.
  • Make sure the house is clean and tidy
  • Check that there hasn’t been any rubbish dumped in the backyard 
  • See if there are any other special conditions

 

If you have an issue, let your conveyancer know as soon as possible to get the property sellers to address the issue.

Settling into your new home

You should be able to pick up your keys after 2 pm on the settlement day.

But what happens after you pick up the keys? You open the front door and do a little dance. Congratulations, you are finally home!

homebuyers moving into the home
Congratulations, you now own a home!

Bonus: Is a 21 day finance clause good or bad?

If you are buying a home in Queensland, the finance clause includes the total time you have as a buyer to get your home loan approved after signing the house contract.

When you buy a home in Queensland, you can sign a contract subject to certain conditions, such as the following::

  •  A satisfactory building and pest inspection
  •  If you can sell your existing property 
  • You being approved for finance

It’s important to double-check that conditions (especially the finance clause) are in your contract before you sign, otherwise, you can be bound to the contract. As the buyer, this is your responsibility.

 

But the one question we get asked all the time:

Is a 21 day finance clause good? 

The answer? NO.

In a competitive property market, 21 days is WAYYY TOO LONG, and you could miss out on your property.

With our clients, we suggest a 14-day finance clause. You could even speak with your mortgage broker so they can even get you in a position to put in an offer subject to 7 days for finance. Now 7 days is a sweet deal and makes your offer much more competitive than others who offer 21 day finance clauses!

21 day finance clause

Bonus: What to do if a real estate agent is underquoting

Underquoting—also known as ‘bait-pricing ‘—is when an agent knowingly lists the price of a property as lower than the true value of the home or less than the price the seller is willing to accept. They then hold bogus auctions, knowing fully well that they are going to reject every bid and then sell the house for a much higher price.

what to do when you make an offer and the agent is underquoting
Underquoting is when an agent knowingly lists the price of the property as lower than the true value of the house or less than the price the seller is willing to accept… it is illegal.

Underquoting is illegal but can be very difficult to prove if you don’t have the evidence. So here is a step-by-step guide on how you can get the evidence to prove underquoting.

  1. If you suspect a property is being underquoted, then ask the agent pointed questions about the price. Do they think it is a fair price? What is the reserve, and what do they think the home will sell for? Make sure to use emails or text messages so you have written evidence with a timestamp. They might give you vague answers, but that’s okay.
  2. Get a copy of the contract and make an offer above the asking price. It is perfectly acceptable to do that even for properties that are going to auction. For example, if the property is listed for $500,000, you can make an offer of $550,000—that’s 10% above the asking price. To make it even more interesting, you can add two dollars. So make an offer for $550,002. Make sure to put this in an email, quoting whatever conversations you have had, and then ask them to take your offer to the seller. They have to do it because they cannot just ignore an offer. Of course, at this point, the agent, who knew the value of the house is actually $900,000, has already started sweating.
  3. But you can make it even harder by including, with your written offer, a personal check with a deposit of 8-10%. Personal cheques are fast and easy and don’t have the hassle of bank cheques. This is assuming they had given you the contract. But even if they didn’t, you can still make your offer ‘in good faith.’ They cannot reject a good-faith offer. 
  4. On the off-chance that the seller accepts your offer, then congratulations, you have just gotten yourself a bargain.
  5. However, the likely scenario is that the seller will reject the offer—after all, no one in their right mind would accept an offer that is almost $400,000 less than the value of their property. Once this has happened, ask the agent to increase the advertised price to a price above your offer. Be sure to remind them about the additional $2. So they can’t re-advertise the property and increase the price to $550,000. It has to be above $550,002. If, after, say, two days, the price hasn’t been updated, send them an email asking why the listing is not yet reflecting your rejected offer since this is against underquoting laws.
  6. At this stage, the agent may increase the listing to $560,000 because it is crazy to list a property for $550,003. If they do that, then start the process again and make another offer 10% above the new asking price plus $2. Keep doing this until the day of the auction
  7. On auction day, ask the agent what the reserve is. They most likely won’t tell you, but when the property finally sells, it means the reserve has been met. Take note of the final selling price of the property. 
  8. Now you have enough evidence to lodge a complaint with the Consumer Affairs department in your state. Use the initial advertised value, your rejected offers, and what the property finally sold for. Here you want to show that the advertised price was too low because of the leaps and bounds the property price went up by before the auction. Also, if the agent tried to ignore your offer or slow down the process in any way, then you can present that as well. Include all the conversations you had via text and email. This is why it is important to have all conversations in writing. 

 

You can report underquoting in each of the states using the following links:

 

  • NSW: 

https://www.fairtrading.nsw.gov.au/help-centre/online-tools/make-a-complaint

 

 

 

  • SA:

https://www.cbs.sa.gov.au/

 

  • NT: 

https://consumeraffairs.nt.gov.au/for-consumers/consumer-conciliation-request

 

Next Steps And Getting Your Home Loan…

If you need a hand with getting finance or have questions on the home buying process, speak with our team and schedule a Home Buying Readiness Assessment Call with one of our Mortgage Brokers.

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Our team of home loan experts is here to help you buy a home in Australia.

Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.

If you want to get started, please call us on 1300 088 065 or book a free assessment online to see how we can help.

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