You can make a verbal or email offer for a property, but nothing is binding until you’ve signed the contract of sale and made a deposit. A previous post [Offer and Acceptance] discussed what happens after an offer is accepted, but this time we’re going to look at some of the options you have when making an offer in the first place.
Small deposit, shorter settlement
You may be able to negotiate with the vendor to pay a smaller deposit — say, around 5 or 7 percent, rather than the customary 10 percent — and reduce the settlement period. This may be attractive to some vendors who have bought a new property and moved already. Remember, the deposit you pay the vendor is different to the deposit your finance lender requires.
The deposit you pay the vendor is money to secure the sale, which is really just cash the vendor can use for their own move (but you can stop them from using it and you should use a buyers agent or lawyer to find out why). You’ll still end up paying the full purchase amount, it just means you’ll have fewer out-of-pocket expenses.
Normal deposit, longer settlement
Alternatively, if you pay the customary 10 percent deposit, you may like to negotiate a longer settlement period. The typical settlement period in NSW is between 30 and 45 days, but could be as long as 90 days. A vendor who hasn’t bought their next property may prefer a longer settlement with the normal deposit amount as it’ll give them the time and flexibility to find their next home.
Offer with a Section 66W
In a private treaty sale, once your offer has been accepted, you’ll need to pay a small deposit — usually 0.25 percent of the purchase price — and you’ll enter the cooling off period. The length of time varies state-to-state (some states like South Australia don’t have one, for example — but in NSW, the ACT and QLD it’s five days. If there’s lots of competition for the property, but you’ve already done your due diligence (had pest and building inspections done, etc), you may wish to waive the cooling off period (during which time, the vendor can still receive and accept other offers).
You’ll be required to pay the full deposit amount you’ve negotiated with the vendor, but you’ll move straight to the settlement period. To waive the cooling off period, you need to submit a Section 66W Certificate to the vendor but you’ll often find you’ll need to get authority from your lawyer or conveyancer so you are aware of the implications.
Learn about buying an investment property or make contact if you are a first home owner. We can also help with the full service of a buyers agency and be your trusted agent on the ground.
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