Bidding war for your home may be tempting, but risky

2016-06-01 06:00
Don’t wait until you are desperate to consider buying a house, you might end up settling for something that doesn’t fulfil what you wanted. PHOTO: supplied

Don’t wait until you are desperate to consider buying a house, you might end up settling for something that doesn’t fulfil what you wanted. PHOTO: supplied

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IN any town or suburb where the demand from prospective buyers exceeds the number of homes for sale, it is usually only a matter of time before property sellers start to receive competing offers to purchase, and have to decide which of them to accept or reject.

If you do end up in the middle of a bidding war for your home, you should start by looking for the offers with the fewest contingencies or “get out” clauses, says Shaun Rademeyer, CEO of BetterLife Home Loans.

And while this may seem like a good problem to have, the decision might not be as easy to make as you think, because selling a home is often about more than just the money, says Rademeyer.

“What if you received an offer for considerably more than your asking price, for example, provided you were prepared to move out and give the buyer occupation by the end of the month? You might not be willing, or able, to accept it,” he says.

On the other hand, Rademeyer says you might choose to accept a lower offer from a prospective buyer who has already been pre-approved for home loan finance, rather than a higher offer from someone who still has to organise finance or sell their current home. Indeed, he says there are many factors to consider and, as any good estate agent will agree, you really need to look beyond price before you decide, and resist being pressurised into making a hasty choice.

“A buyer that makes a good offer, but says it is only on the table for a couple of hours, for example, is probably not that serious, and is therefore likely to prove difficult to deal with during the transfer process.”

So, if you do end up in the middle of a bidding war for your home, you should start by looking for the offers with the fewest contingencies or “get out” clauses.

Ideally, your would-be buyers should not have another property to sell before they will actually be able to buy yours, and should have home loan pre-approval so you can be confident that they really will be able to secure the necessary home loan within a few days.

“Next, you may want to consider which prospective buyers are most willing to accommodate your timing as regarding occupation of the property. If you need to delay a move until the end of a school term, for example, or until the end of a work contract, that can have a significant influence on which offer you will accept.”

In addition, he says you should find out whether the competing buyers already have the cash in hand that they will need to pay a deposit, as well as the transfer duty, bond registration costs and legal fees.

“It is no good accepting a higher offer if you are going to have to wait months for a buyer to get this cash together, and your agent should, in fact, only bring you offers from people who are financially able to buy your property, as well as being willing to do so.”

He says you also need to make sure that you negotiate transparently and in good faith.

“For example, if you tell someone who made an offer on a Saturday morning that you’re not going to respond until Monday, you must also tell them that this is because you are expecting further offers after your show house on Sunday,” explains Rade-meyer.

And if you receive several similar offers, Rademeyer says you should be open about that too, and give each of those prospective buyers the opportunity to either confirm that this is their “best and highest” offer, or to find out what it would take to make you pick their offer and decide if they want to do that.

“However, you must then be prepared to accept the improved offer. Tempting as it may be to keep a bidding war going, most buyers won’t like it, and you will run the high risk of ending up with no offer at all.”

- Property24.

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