Buying a property is often the biggest financial decision that a person will make, and making an offer is a significant step in that process.
Be prepared before submitting an offer to the agent or vendor (seller) by understanding the sales process and what follows.
Obtain a copy of the sale contract as soon as possible and have it examined by either a licensed conveyancer or solicitor. Doing this before making an offer will save time if you need to make a decision quickly about whether to buy a property. Also, having your finance pre-approved before making an offer will help speed things up.
Offers can be made verbally or in in writing. Putting offers forward in writing (eg. email) may help you keep track of negotiations and confirm why an offer wasn’t accepted. Watch our video on buying a home and making an offer
Before you make an offer on a property, or invest further in preparing to buy it, research prices for similar properties. Be wary if the agent's pricing information indicates underquoting.
Underquoting is when an agent falsely advertises a property or tells you that it will sell for an amount that is less than their actual estimated selling price in the agency agreement they have with the seller. This is an offence for which agents may lose their fees and commissions and be fined up to $22,000.
Under the new laws that start from 1 January 2016, when an agent provides an estimated selling price, it must be reasonable and based on factors likely to influence the price. Examples include location, architectural design, future use of the property (eg. zoning, rights of way), market demand, comparable sales, seasonal and economic factors.
To make sure agents follow their responsibility to not falsely generate interest in a property through unrealistic price information, Fair Trading has issued agents with Underquoting guidelines for residential property. The guidelines can be accessed from our Underquoting page for agents.
If the final sale price is higher than the initial advertised price, this does not mean underquoting has taken place. This price may vary considerably from what could be reasonably predicted and may result from intense competitive pressure between buyers.
Avoid relying too heavily on an advertised sale price. Treat the information as a guide and research the property and recent comparable sales in the area. Ask about the seller’s expectations. If the agent provides you with a price estimate, you should ask the agent to explain the reasons for that estimate.
The following questions and answers for buyers will help you understand how underquoting laws affect you.
For property you are interested in, ask the agent to put in writing (for example by email) their estimated selling price and ask the agent what the seller’s expectations are. The agent and seller may choose not to disclose any price, either in advertising or verbally. However, if they do, they must comply with the new requirements.
You can also take the following precautions when seeking to buy property:
The agent may be underquoting if they give a selling price that is much lower than what you would expect based on your own research, and cannot explain the reasons for their estimate. You may decide to report this as potential underquoting to NSW Fair Trading.
If you suspect that an agent has deliberately underquoted their reasonable estimate of a property's likely selling price, whether in information provided directly to you or through marketing material, you can lodge a complaint online or call NSW Fair Trading on 13 32 20 (or phone our underquoting hotline on 1800 625 963). It helps if you can include evidence with your complaint of the likely selling price that an agent has indicated.
Customer data helps to build a picture of potential unlawful activity. Fair Trading inspectors may use the data to audit agents and check if there is a significant difference between a price estimate an agent has supplied to consumers and what is recorded in the agency agreement. Inspectors can also check that agents have kept evidence to show that their property price estimates are reasonable.
If you inspect a property and ask what the agent expects the property will sell for, any price information the agent provides cannot be less than their estimated selling price recorded in the agency agreement. However, the seller can instruct the agent not to publish or provide any price estimate to potential buyers.
Agents are not required to provide the reserve price or the estimated selling price. However, if the agent does provide any details of the selling price in an advertisement, in writing or verbally, it cannot be less than the estimated selling price in the agency agreement.
Remember that, for an auction, the reserve price may not be decided until auction day. For more information about preparing for an auction, read our Buying property at an auction page.
While the agent and seller may choose not to provide any price information when marketing a property, consumers' desire for price information may drive agents and sellers to supply this information.
The laws balance the interests of sellers, buyers and agents by:
As part of its audit program, NSW Fair Trading can require agents to demonstrate that they have based their selling price estimate on the relevant evidence available to them (for example, comparable sales in the area). Agents must keep written records of any verbal price estimates given to the seller or prospective buyers. Fair Trading also responds to complaints from consumers and has the power to demand records from agents.
Once you make an offer, if you and the vendor agree on the price, you are one step closer to owning the property but it doesn’t mean that you have finalised the sale!
Before exchanging contracts, the seller may negotiate with other buyers for a higher offer, even if you have made an expression of interest payment. If the seller accepts another offer and exchanges contracts with that party, any prospective buyer who misses out on the property (despite a verbal agreement) is gazumped.
Once you have made an offer, you may be asked to pay an initial deposit as an expression of interest. This won’t mean that the property is yours or that it gets taken off the market. It only proves to the seller that your offer is serious. The seller or agent can take as many preliminary deposits as they like for the one property. However, when you pay this deposit, the agent must provide you with a receipt and tell you in writing that:
The agent must also tell you if someone makes a later offer on the same property, as soon they become aware of it.
Remember that the agent selling the property is not working for you, but for the seller (or owner) of the property.
There are other considerations when making an offer on a property that hasn’t been constructed yet. Learn more at our Buying off the plan page.
A seller’s agent may use aggressive sales tactics to try to encourage you to agree to buy a property. While an agent is allowed to be persistent in their attempts to secure a sale, the law does not allow them to engage in high pressure tactics, harassment or unconscionable conduct.
For example, an agent cannot repeatedly call you straight after you have inspected a property and demand you make an offer by the end of the day.
You can ask the seller to change the terms of the contract of sale before signing on the dotted line. A solicitor or licensed conveyancer can review the contract to provide important advice on what specific terms you may want negotiate or change given your personal circumstances.
Once you have entered into a contract, you are bound by the terms of that contract. So, ensure any changes are made and agreed in writing beforehand.