- Tags: Selling Property, Property Investment, Gold Coast Property
4 Examples of Offers in a Competitive Property Market
With high property demand and low available stock in suburbs like Palm Beach pushing up property prices, we are getting phone calls every week at First National from disappointed buyers who just can’t seem to break into the Gold Coast property market.
So what should a good offer look like when you’re trying to buy a property in a competitive market?
I sat down with First National sales agents Bob Berry from Palm Beach and Dean Trewin from Elanora to find out. The following includes some real examples of real offers on properties that have sold on the Southern Gold Coast in 2016 and 2017 in what has been a strong seller’s market.
EXAMPLE ONE - Motivated Seller
Price: Offers over $1.2 million
Seller situation: Motivated to sell. Worried the property was too expensive and would sit on the market too long.
Buyer Interest:
BUYER 1 - Signed contract for $1.22 million, subject to Building & Pest
BUYER 2- Expression of Interest for $1.1 million, subject to Building & Pest and finance
BUYER 3 – Expression of Interest for $1.175 million, Building & Pest and finance
OTHER BUYERS- 4 other expressions of interest over $1 million were received with similar conditions, but at lower prices than the above three highest offers
Outcome: Even though the property had been on the market for just 5 days, the seller was keen to sell and had received a contract (not just an expression of interest) which was over their asking price, so the seller decided to accept the highest offer.
How could it have been different?: If the seller was less motivated and happy to wait another week or two, with the condition of market and the level of interest being shown in the property, it may have been possible to negotiate further with the other potential buyers to increase their offers and/or more and better offers could potentially have been received. In this situation however, the seller was keen to finalise the sale so it was advantageous as a buyer to have made the best offer in the first instance. In fact, all buyers were informed by the agent to submit their best offers by the close of the first week as the seller had requested to review all ofers at that time, and the buyers were informed they may not have a chance to negotiate or put another offer in. This was indeed the case, and the property was sold quickly.
EXAMPLE TWO – Confident Seller
Price: Offers over $750,000
Seller situation: Did not need to sell the property quickly and because of the condition of the market, the sellers were happy to wait for the right buyer to come along.
Buyer Interest:
BUYER 1 - $700,000 increased to $745,000, (subject to settlement of the sale of their property)
Outcome: The property was priced at top dollar, and received one offer within 3 weeks for $700,000. After 2 days of negotiating, the buyer increase their offer to $745,000. No other offers were received. The property was sold in 26 days.
How could it have been different?: The sellers of this property were in the process of buying another property. If the sellers had been relying on the sale of their current property to purchase the new one, they may have felt pressure to accept the first offer they received. Or after receiving good interest but no other offers on the property, they may have felt pressure to reduce the price – which may signal to an astute property investor that the sellers may be more willing to negotiate on price. In this situation however, the sellers did not need the money from the property sale immediately and therefore the agent could be very confident negotiating with the buyer to achieve the desired price.
EXAMPLE THREE – Confident Seller
Price: Offers over $699,000
Seller situation: This was a deceased estate, and the executors of the property were located interstate.
Buyer Interest:
BUYER 1 - $745,000, subject to finance and building and pest
BUYER 2 - $730,000, unconditional
- 6 other offers were received over the asking price
Outcome: The sellers of the property were interested in settling the estate in a timely manner. As such, they were happy to accept the $730,000 unconditional offer and settle immediately rather than wait for finance approval and inspections to be completed. The property was sold in 10 days.
How could it have been different?: In this situation, the executors of the estate were not particularly emotionally invested in the property, and were happy to trade a higher offer for a quick settlement. Most of the offers received were also well over the asking price which made it a fairly easy decision when no emotion was involved. If both of these offers were below the asking price, it would have been interesting to see if they would have still accepted the unconditional offer, or waited for a higher offer?
EXAMPLE FOUR – Emotional Seller
Price: Interest over $799,000
Seller situation: The sellers had owned this investment property for a number of years, and it had been in the holiday rental pool for most of that time.
Interest:
BUYER 1 - $775,000 unconditional
BUYER 2 - $760,000 building & pest, finance; increased to $780,000
BUYER 3 - $750,000 building & pest, finance
Outcome:
After the offers had been received, it was apparent that it would take some negotiation to achieve the desired price. The sellers indicated they would consider offers as low as $785,000.
BUYER 1 was unwilling to negotiate on their unconditional offer, however after several weeks BUYER 2 increased their offer to $780,000 with conditions. The offer from BUYER 2 was accepted, and the property sold within 6 weeks.
How could it have been different?:
When you consider the fact that the property was taken out of the holiday rental pool for the duration of the sale process, it actually cost the sellers money in lost rental income to wait for an increased offer from BUYER 2 when they had an unconditional offer from BUYER 1 on the table that was just $5,000 less than the final sale price.
Therefore, it’s difficult to say this decision was based on the seller’s picking the highest price when you factor in this opportunity cost. According to the sales agent, the fact that the sellers thought that BUYER 2 seemed more interested in the property, were willing to negotiate on the price and would potentially enjoy the property more than the other buyers had a bigger impact on the final outcome of the sale than the value of the offer. Anecdotally, this was a very emotional sale with the sellers still unsure whether or not they wanted to sell even up until the moment when they were ready to sign the contract.
This is a good example of a property sale with sellers who are still emotionally attached to the property, and needed more than just a good price to convince themselves to go through with the sale. Having an agent that was able to convey the buyer’s intentions and motivations to the sellers played a big part in the outcome of this sale.
Many of you may have clicked on this article expecting to take everything in here with a grain of salt. We are, after all, real estate agents so you may have thought the aim of this article was to produce several examples of how unconditional offers at 20% over the asking price are a great idea in a competitive market, and encourage you do to the same to land your dream home.
Apart from that being very unethical, the problem with that assumption (and the point of the article) is that we have seen time and again there is no magic formula for making a successful offer on a property. If you’ve read through each example, you may have discovered how asking the right questions and understanding your own goals and motivations, as well as the seller’s goals and motivations, will give you the best chance at making the right offer at the right time.
by Nikki Tuarau
4 Examples of Offers in a Competitive Property Market
palmbeachfn.com.au May 2017 First National Palm Beach 15 Palm Beach Ave Palm Beach, Queensland 4221
Phone: 07 5559 9600