In non-auction transactions in New South Wales, it is entirely possible to make an offer to purchase a property for a given price (either verbally or via an informal written communication) and not necessarily be bound to complete the transaction. In fact, it is recommended to do this.It is an important preliminary process to first establish the price that a vendor would accept before finalising other necessary aspects of due diligence (e.g. pest & building reports, contract review by a lawyers/conveyancers, strata reports (if applicable) and a formal valuation).Due diligence is a time-consuming and expensive process but it is almost entirely wasteful if the vendor and purchaser aren’t already in agreement on price.If the vendor is receptive to it, we recommend putting a basic offer forward regarding price and other key terms before commencing further due diligence. (Of course, it is entirely possible, particularly in very hot markets, for the agent /vendor to ask that any offers be unconditional. Unfortunately there's not much we can do about that).A template which you might want to consider is as follows:“Please can you ask whether the vendor would accept a price of $[insert price].We are motivated and committed purchasers, and our offer would only be subject to a satisfactory [pest and building inspection][strata report]{delete which ever is inapplicable}, legal review of the contract [and an update from a financier with respect to our existing finance approval]{delete if finance is not required}. These matters are all in hand and can be finalized as soon as we get agreement from the vendor on price.{Insert the following only if necessary:} The only other additional requirements we have are:
- A 5% deposit
- A 60 day settlement period
- A 10 day cooling off period
- [Any other specific requirements]
Rest assured that it is not strictly necessary to stipulate each and every condition at this stage. When your solicitor reviews the contract and has a conference with you, your normally get “another bite of the cherry” in terms of requesting other things. And you can also withdraw from the transaction all together if you want to. Having said that, if you do have any definite and clear requirements (e.g. a longer settlement date, a smaller deposit), it is recommended you indicate that at as earlier a stage as possible.In conclusion, assuming it is possible, it is in the best interests of the buyer to understand the vendor’s price expectations as early as possible before spending significant sums of money on due diligence. In New South Wales (at least), it is possible to do this by making an early offer ‘subject to contract’. While you will not be bound by the offer per se, you should be willing and able to transaction on that price if the subsequent due diligence you undertake continues to support the transaction.If you have any questions about this article, please contact the office on 1800 870 407 and one of our solicitors/conveyancers will be able to assist.
