Writing An Offer For A House

- 12 Jul, 2021

After scouring the housing market for some time, you've fallen in love with a home that ticks all your boxes. Now you're wondering how you make an offer on the house without paying more than you need to. We explain everything you need to know during this exciting time.

Australian homes typically sell by private treaty, where the vendor sets the price of the property, or via auction, which involves making a bid over the reserve price to secure the property. Both buying processes are completely different and how you make a house offer will depend on the selling process of the property.

What do you need to put an offer on a house?

Before taking a serious look at the property market, seek pre-approval from your lender first. By doing this you will know the limits of your budget and won't set your sights on something outside what you can afford.

Seeking pre-approval, sometimes called conditional approval, also puts you in a stronger position when making an offer as it makes you more attractive to vendors.

Although you can make verbal offers on a house, for clarity on details and terms it is best made in writing.

In your letter of offer, the following should be included:

The names and addresses of both the seller and buyer
The offered purchase price and address of the property
The settlement date when the buyer intends to pay and obtain the title
Details of how you wish to pay the deposit, whether it be cash or by transfer
Any inclusions you intend to buy with the house, such as large appliances.
Conditions or contingencies of sale, such as pest control or building inspections
Any additional contract clauses. Use specific clauses to ensure features of the home are fully functioning upon purchase e.g. the swimming pool, the electrical and gas network.

You may also want to seek legal advice before making any formal offers.

How do I make an offer on a house?

Making your offer is as simple as contacting the property agent and letting them know the amount you're willing to pay – to start with a verbal offer is fine.

Tips on making your offer:

Gauge market interest by attending home openings. More interest will likely mean more bids to contend with.
Make your offer early and quickly to avoid competition from other buyers – don't be afraid to push the vendor for a quick answer.
Make sure your offer is unconditional by seeking pre-approval on your home loan from your bank before making your offer.

Once you've given your verbal offer to the agent, they'll take you through the process of formalising a written offer.

What happens when you make an offer on a house?

There are three typical outcomes once you make an offer on a house.

The offer is rejected: This could indicate the gap between your offer and the asking price was too great. Reconsider whether the property might be out of your price range or if you'd like to increase your offer.
The seller counters your offer: The vendor may consider your offer and present you with an amount higher than yours. This can be a starting point to negotiate a price you both feel comfortable with or to accept or reject the counter-offer. Take stock of your financial position and what you feel the property is worth before engaging in negotiations.
The offer is accepted: The best possible outcome is an accepted offer. Once the buyer and seller are both satisfied with the purchase price the offer is accepted and the agent will begin to prepare contracts.

Can you withdraw an offer on a house before it is accepted?

Even after making a formal offer the buyer has several stages to withdraw from the sale before it is finalised.

An offer is not a legally binding contract and can be withdrawn before the seller accepts. You can revoke your offer by giving the agent a written letter informing them of your offer withdrawal. If you decide you want to revoke an offer, don't waste time. It becomes much more difficult and costly to revoke and offer once it is accepted.

Most states also have mandated cooling-off periods. This gives the buyer several days to reconsider their purchase after the exchange of contracts. However, withdrawing from the sale at this point will come at a financial cost to the buyer.

Home loan lingo got you down? Check out the eChoice finance glossary for help with those pesky terms!

What is considered a lowball offer?

A lowball offer is an offer considered to be less than what the property is actually worth, and is a tactic many home buyers might consider in a slow market. However, while it's natural to want to get 'bang for your buck' in any purchase, a lowball offer is not always a good tactic in home buying.

Research the sale history of the property and look at similar property types in the area that have recently sold to get an idea of the worth of the property.

You might also like: How to research the property market

Can a seller back out of an accepted offer on a house?

Generally speaking, a vendor cannot back out of a sale once an offer has been accepted, however, there are few exceptions. This could include a vendor cooling off period being stipulated in the contract or the buyer not meeting the requirements of the contract.

As a seller, you should seek legal advice for a better understanding of what breaking a legally binding contract would mean for you.

How much is a deposit on a house offer?

The amount of money you put down as a deposit is subject to your lender and their criteria. Some let you borrow up to 95% of your property's value so you may only need to put down 5% to have your loan approved.

But, it's a good idea to aim for more – you won't have to borrow as much, you will have lower repayments and you will lower the amount of interest paid over the lifetime of your loan.

You're also in a better position to negotiate lower interest rates with lenders because you pose less of a risk with less to repay.

When you put down 20% of the sale price or more, you also avoid paying Lender's Mortgage Insurance. This is a way to protect the lender when you borrow a large fraction of your purchase price. This cost can either be upfront or made in addition to your repayments.

Calculate your LVR

Your Results

Property value	$500,000		78%
Loan amount	$390,000	Loan to value ratio (LVR)	78%

Tips for your situation

Your loan is less than 80% LVR which is a low risk. You will not need to pay Lenders Mortgage Insurance.
Please call us on 1300 302 914 or enquire online to discuss your situation.

Your Results

Property value	$500,000		82%
Loan amount	$410,000	Loan to value ratio (LVR)	82%

Tips for your situation

Your loan is over 80% LVR. This means that you may need genuine savings and will need to pay an LMI premium.
Please call us on 1300 302 914 or enquire online to discuss your situation.

The purpose of this calculator is to assist you in estimating whether you will need to pay lenders mortgage insurance (LMI) based upon the information you put into the calculator.

The results of this calculator are estimates only. They are based on the information you have provided. If you change any of the information, you will obtain a different result. Other fees, charges and costs may apply.

The actual amount you can borrow, and the applicable loan repayments, can only be determined once you submit a full application to us and we assess your application using our credit criteria applicable at that time.

Before acting on the results of this calculator you should seek professional advice and speak to an eChoice consultant.

Is making an offer on a house legally binding?

Every offer that you make has the potential to be legally binding, especially if it is made in the form of a signed contract of sale. If the seller agrees to the contract that you have proposed, and signs, then the sale is legally binding. If in doubt, it is best to seek legal advice.

You might also like: What is Lenders Mortgage Insurance and How Can It Be Avoided?

Should you accept the first offer on your house?

Selling a property comes with its own set of worries, one of the most important being knowing when to accept an offer.

Take time to consider what you are willing to accept and what conditions you might negotiate on when you place your home on the market. Some things to consider:

Recent sales: Look at what recent sales suggest. Although you may have a target number in mind, you must compare this to how similar houses in your suburb are performing. Then assess if the offer seems high or low.
- Look within a 1km radius
- Houses sold within the last six months
- Same block size, same number of bedrooms and bathrooms
Is it a cash offer? Sometimes a cash offer means one less contingency to worry about and can make for smoother sailing.
Have you got a limited buying pool? If you haven't received a lot of interest and are eager to sell, perhaps accepting is best for you.
Are you pressed for time? Sometimes sellers are relocating for a new job or to a new country and need to sell.
Have you already found your next home? Often a seller's inability to pay two mortgages leaves them selling faster than they like.
Have you sought professional advice? Seek professional advice from real estate and financial experts to guide your decision making and establish what you are willing to negotiate on and what you are not.

You might also like: Can you trust your property's valuation?

What is my mortgage repayment?

Loan Amount $

Interest Rate %

Loan Term (Year)

Loan Type

Principal and Interest

Interest Only

The purpose of this calculator is to assist you in estimating what your home loan repayments may be based upon the information you put into the calculator. It does not constitute an offer of credit.

The results of this calculator are estimates only. They are based on the information you have provided. If you change any of the information, including the interest rate, you will obtain a different result. Other fees, charges and costs may apply.

We have made assumptions when producing the calculations, including:

Fees and charges: The estimated repayment amount does not include any fees or charges.
Repayments: Repayments are indicative only. When calculating repayments, we have had to make a number of assumptions which may affect the accuracy of the amounts shown. They include:
- That the interest rate displayed will not change and will apply for the full 30 year loan term (or as selected by you) as we can't predict what rates will do in the future.
- That interest is charged to the loan account at the same frequency and on the same day as the repayments are made (this may not be the case for your loan).
- One year is assumed to contain exactly 52 weeks or 26 fortnights. This implicitly assumes that a year has 364 days rather than the actual 365 or 366.
- Any upfront fees, charges or duties you incur in relation to the loan and/or the property are not included.
- Repayments are principal and interest repayments.

Before acting on the results of this calculator you should seek professional advice and speak to an eChoice consultant.

Do sellers have to respond to an offer?

It is best practice to respond to all offers, and if you are selling through agent, they will likely push you to give an answer to any offer. If you choose to reject or counter the offer make sure you respond in a timely manner.

Can you bid lower on a house?

Buyers making an offer can bid lower than the asking price, although some agents may not commit to writing an offer if it is too low. Most vendors will not go below 5% – 10% of their asking price but there are factors to consider:

Research: This comes up a lot, but it really pays off to know what recent sales say about the asking price. It may be too high, and a lower price may be more deserving.
Long listing: If the property has been listed for a while this can be a sign that the seller may be asking too much.
Inspections: Complete an inspection and if you are given a reason to decrease the value of the home use this as a point of justification in your letter of offer. Sometimes this needs the eyes of a professional who can identify problems outside your expertise.
What does the seller want? Sometimes the seller would rather a longer settlement time instead of the highest offer. Find out what motivates their need to sell and cater to them.
Approved finances: Sometimes having your finances approved and ready to go can make you appear more competitive.

Do I need a lawyer to make an offer on a house?

There is no legal requirement to use a lawyer to make an offer on a house but it is advisable to speak with either a lawyer or a specialised licensed conveyancer to look after your transaction. They can help guide you through negotiations and offers, although the real estate agent will also provide guidance where needed.

When should you lower the price of your house?

In a slow market or a buyer's market, you may want to consider lowering the price of your home. Before you lower your asking price, consider what offers you are willing to accept and whether it's the right time to sell if offers are low.

Selling in a buyer's market – when there are many properties for sale and competition among vendors is high – means prices are driven down. Consider how motivated you are to sell at the given time and assess whether your asking price is inflated. Consider reducing the price or waiting out the market.

Some other things to consider include:

Are you marketing your house well? Have you really promoted its benefits and features? Does it include a virtual tour?
How many open houses have you had?
How many hits have you received on your listing?
What feedback have you had from agents?
Can improvements make a significant difference to the demand of the house? Are they achievable?

Can you put an offer on a house that already has an accepted offer?

When a property is "under offer" but the sold sticker has not gone up, this means that it is still subject to a few conditions. This can include cooling off periods or pest and building inspections. At this point you can phone the agent and find out which conditions are still being determined so you can keep track of whether it will return to the market. You can still inspect the property to make sure it ticks all your boxes, and then if need be, sit tight and wait.

Cooling off periods state-by-state

Often contracts for the sale of residential property come with a cooling-off period, though, it is rare buyers to pull out of a sale. Under a contract of sale, terms can be changed to waive, reduce or even extend a cooling-off period. These terms are discussed and settled in pre-sale negotiations.

Each Australian state and territory have their own legislation regulating cooling–off periods and typically a penalty for withdrawing from a contract.

Queensland: You have five business days from the exchange of the contract until 5pm on the fifth day. Weekends and public holidays are not included. If the buyer opts out of the sale, the seller may deduct a financial penalty of 0.25% of the sale price from your deposit.
New South Wales: You have five business days until 5pm on the final day to back out of the sale. The buyer will lose 0.25% of the sale price to cancel the contract.
Tasmania: There is no cooling off period on private treaty real estate.
Victoria: You have three business days from the contract of sale to opt out. The buyer will be required to pay 0.2% of the purchase price as a penalty.
South Australia: You have two business days to back out of the contract and notice must be given by 5pm. If the buyer pulls out, they forfeit a holding deposit if one is given, but any purchase deposit over $100 will be returned.
Australian Capital Territory: You have five business days until 5pm on the final day to back out of the sale. The buyer will lose 0.25% of the sale price to cancel the contract.
Northern Territory: You have four business days to opt out of the contract of sale. The Northern Territory is the only state where the buyer will not suffer a penalty. Both purchase and holding deposits will be refunded.
Western Australia: There are no compulsory cooling off periods unless negotiated into the contract of sale.

Extra conditions may be added to your contract of sale such as your ability to obtain finance or the sale of your current property.

If you buy a house at an auction, say goodbye to a cooling off period. Cancelling after securing the property at auction will become an expensive exercise, so be confident in your choice and your finances before this.

You might also like: What is a cooling-off period?

Can I pull out of a contract after my offer is accepted?

Contract cancellations need to be made in writing and usually within a period of time and at a cost. Look above to find the cooling off laws in your state, and if you fall within that time.

You can also pull out if the seller fails to fulfil a condition under the contract. But if you want to withdraw after this period of time you should speak to a lawyer about the consequences of breaching a contract.

Can a realtor disclose other offers?

Legally there is nothing stopping a real estate agent from disclosing if other offers have been made and what the magic number was. But, according to Lisa Suryawan, Sales Manager of Xynergy Realty, she says:

"It's best not to share what the offer amount is however we could give an indication of a range where the offer might fall."

How do you negotiate buying a house?

Negotiating buying a house can be tricky – especially when properties are in short supply and competition between buyers is high.

It can help to:

Have your deposit ready to lock down your offer.
Know your limit before stepping into negotiations.
Assess the sales history of similar properties within a 1km radius to work out what price is reasonable.
If buying at auction, attend others first to gain confidence in the process.
If you miss out but had a reasonable offer ready, ask the real estate agent to contact you for other properties in the area.

What to know before making an offer on a house?

Research the area: know that the price is competitive and that the neighbourhood is one that you want to live in.
Research the house: Is this suitable for your needs?
Have you done the relevant inspections or have contingencies to do so?
Ask the seller to give you an estimate of the utility bills
Secure your finances and know if the house is within your budget
Make your intentions clear, but don't reveal your highest bid.
Find a good real estate agent, not just one that has been suggested to you.

How to make a pre-auction offer?

Properties often go to auction because the real estate agent believes the property is going to garner high interest among buyers. While this increases the likelihood of a positive outcome for the vendor, the competition of an auction can suddenly push the price of property far above its reserve, leaving hopeful buyers disappointed.

For a pre-auction offer to be taken seriously, you will likely need to make it worth the vendor's attention. To use the old adage, make them an offer they can't refuse.

Tips for making a pre-auction offer:

Make the offer worth cancelling the auction: Is the price too good to refuse? (without blowing your budget or exceeding what the house is worth).
Does the vendor want the house of their hands? If the vendor needs the finance for another purchase, the right early offer might be enough to sway the deal.
Know the area (and your budget): Research the sales history of other properties in the area and remember to stick to your spending limit.

How do I make my offer stand out?

Do your research. Know if you can negotiate and give justifications as to why you lowered your price.
Find a great real estate agent who will be proactive and communicate between both you and the seller well.
Come with pre–approved finances .
Make your offer personal. Sometimes the seller might want to know the house is being given into good hands and will be kept much the same. Highlight what you most like about the home and how it is unique.
Get the seller to like you. Share something about yourself and why this home is particularly striking to you.

You might also like: The Guide to Property Investment

Looking for a home loan? Contact eChoice. With access to 100s of mortgage products from over 25 different lenders, eChoice brokers have the tools to help you find the perfect home loan to suit your needs. Best of all? We do all the paperwork!

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Looking to buy in Ultimo, NSW 2007.

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