How to make an offer on a house

Want a better understanding of the buying process and how to make an offer on a house?

Making an offer is a significant step in the property buying process—and while getting the price right is crucial, there's actually a lot more to it. This is especially true in Australia’s competitive property market, where multiple buyers are often chasing the same home. 

After reading this you should have a good insight into all the steps in the process, and understand how to put in an offer on a property so you maximise your chances of securing your dream home. 

Let’s start by looking at what “making an offer” actually means. 

What does “making an offer” actually mean?

When you make an offer on a property you are essentially notifying the seller of what you're prepared to pay for it. An offer can be made verbally or in writing, but a written offer is typically taken more seriously by sellers as it is a physical record.

Offers can be for the asking price, but are often lower in a declining market (prices falling) or higher in a rising market (prices growing)

It's important to note that making an offer, even in writing, does not mean you have secured the property and finalised the sale. The seller could receive other offers from prospective buyers, which they could choose to accept over yours. If they do accept your offer you are then obliged to make an expression of interest payment. This is basically a deposit that confirms you are ‘serious’ about purchasing the property. 

The bottom line is that a sale is only finalised once contacts have been signed and exchanged. 

Let’s now look at the process leading up to, and including making an offer, so we can understand where it all fits in.

Making an offer: all the steps in the process

1. Qualify for a home loan and get pre-approval

The first thing to do is make sure you can qualify for a home loan, by meeting the criteria set by the lender. They will want to know if you are able to service, or repay, the loan - based on a number of criteria. Factors they take into account include your income/joint income of a couple, stability of your employment, ability to save/amount saved for a deposit and how much debt you currently have on items like credit cards and other personal loans. 

You should also look to get pre-approval, otherwise known as conditional or approval-in-principle, from your lender. It confirms:

• How much you could borrow, so you know what property you can afford.
• You are a serious buyer who is unlikely to delay the sale process.

It is however not a guarantee that you have actually qualified or been approved for a home loan. You can make an offer on a property if you have pre-approval, but you need to get unconditional or final approval from your lender to actually purchase a property. Pre-approval is typically only given for 90 days, as your financial circumstances may change in this timeframe. You will have to apply for pre-approval from your lender again if the timeframe expires.

2. Get legal advice from a solicitor or conveyancer

Buying a property is often the largest transaction many of us make over the course of our lives, so getting legal advice is essential. A solicitor or conveyancer, who specialises in property transactions is best placed to give you advice about making a written offer, and what it should contain. They will also be crucial in ensuring you understand the contract of sale, and that it reflects all your wishes. Common clauses that are included include a list of inclusions or items that will remain in the property after the sale - such as light fittings or an integrated dishwasher. 

3. Research properties and attend open inspections

With your finance organised and a legal team to watch over you, you can begin to research and view properties. Attending open inspections can be a good way to gauge the level of interest in a property, initially from the number of people attending the first one. If you're serious about making an offer you should take this opportunity to get to know the sales agent. They can let you know what level of interest there is in the listing, and if the seller is open to an early, pre-sale offer. 

4. Prepare your offer and set conditions of sale

There are two elements to making an offer:

• The price you are prepared to pay the vendor
• The condition of sale - which are legal clauses written into the contract of sale that protect the interests of you and the seller.

First up, you need to decide how much you want to offer for the property. This should be based on a number of factors, primarily current market conditions but also the motivation behind the sale. It is pretty standard to offer anywhere from 5% to 10% below the asking price, though it is up to the vendor to accept or reject this. They could also make a counteroffer, which you will have to assess and respond to. If you are in a rising market with a lot of interested buyers there is less incentive for a vendor to accept a low offer. The reverse is true if you are in a falling market, with declining prices with comparatively fewer interested buyers. If, for example, a property has failed to sell at auction and is then listed for sale by private treaty, the vendor may be more likely to accept a lower offer. 

If the property is getting sold via auction you can make a pre-auction offer, but this should be on or above the asking price. Pre-auction offers are also made in writing via the vendor’s real estate agent, with your price and conditions of sale. 

The second part of your offer is the terms and conditions attached to the sale, which are set by you and the vendor. Fewer conditions are generally viewed more favourably by a vendor, but you need to make sure your interests are protected. An example of this is setting a condition that requires the property to pass a building and/or pest inspection. Vendors may require a condition that your offer is subject to finance approval. This is where an experienced property conveyancer can help ensure you minimise your exposure to risk. To secure a quick sale you could also make an offer with no conditions, an unconditional offer - though you need to be confident there is no risk to this strategy. 

5. How to make an offer 

As we mentioned above, it is best to make an offer in writing, typically in an email or a physical letter. This ensures there is a record of your offer and guarantees the vendor will respond to it. You present your offer via your conveyancer who will present it to the vendor’s real estate agent. It often makes sense to get your offer in early, as it establishes you are a serious buyer. Information to include in your written offer includes: 

• Your name and address,
• Seller’s details
• Property address
• Your offer price
• Deposit amount
• Lender’s details
• Proposed settlement date
• Conditions of the sale, including inclusions

6. What happens after making an offer

The vendor will then accept, reject it or make a counteroffer. Look to get an answer on your offer from the vendor asap, ideally within 48 hours. If you leave it longer than this they may think you are not interested anymore. If you are considering a counteroffer or follow up offer, be careful not to take too long, as they may accept an offer from another buyer. 

You’ll also have to pay an expression of interest deposit now, which is typically 10 per cent of the purchase price. This is returned to you if your offer is unsuccessful. If your offer is accepted the vendor then is obliged to meet any conditions you’ve set, like passing a building inspection. This is also when your finance approval also needs to be processed, typically over a few days, to avoid a delay. Delays caused by you can result in you losing your deposit, and missing out on the property. 

When the vendor signs the contract the property legally belongs to you!

Let’s now cover some frequently asked questions around making an offer on a property.

Making an offer on a house FAQ

When should I put in an offer on a home - early in the campaign or later?

Generally speaking, you should make an offer on a property sooner rather than later. This confirms to the vendor and their agent that you are a serious buyer, and also puts you front of mind with both of them. You should however be cautious making an early offer if the asking price is very high or open inspections are very quiet, i.e. there is little interest in the property. 

Should I offer less than the asking price?

It is common to make an offer from 5 to 10 per cent below the asking price, though prevailing market conditions are a major factor to consider. Low offers are more likely to be successful in a declining market with low buyer demand, where vendors may be more open to accepting a lower bid. The opposite is true in a rising market, where vendors are more likely to hold out for a higher bid from another buyer. 

Can I withdraw my offer if I change my mind?

Under Australian contract law you can change your mind and withdraw your offer, as long as you notify the vendor before they sign the contract. The contract of sale is not binding until it has been signed by them. You need to revoke your offer in writing and deliver it to the vendor’s agent asap.

Can I put in an offer on a house without pre-approval?

You can make an offer without pre-approval, but it is up to the vendor if they choose to proceed with your offer. You need to notify the vendor that your offer is conditional on getting finance approval. 

Can I put in a verbal offer on a house?

You can put a verbal or written offer on a house, but verbal offers are discouraged as they are generally not binding. A written offer is legally binding and is an indication you are a serious buyer. 

What is considered a lowball offer?

A ‘lowball’ offer is when you make an unrealistically low offer on a property, based on its asking price. Lowball offers are often rejected by vendors, though in a declining market with falling prices it could be worth making an offer a lot lower than the recommended 5 to 10 per cent under the asking price. 

How much of a deposit do I need to put down when I make an offer?

You will typically have to put a 10 per cent deposit down when you make an offer on a property. This is known as an expression of interest deposit. Vendors are free to set the deposit they require, though this is likely to be very close to this figure. 

Can you put offers on multiple houses?

In Australia, there is no law against making offers on multiple properties. This is a common strategy in a ‘hot’ or rising market where demand for homes is high as it gives you more chance of having your offer accepted and securing a property.