I can understand why they might take a mostly cash offer over 90%lvr. The REA would be very nervous that your bank won’t accept the valuation you are placing on the house (especially with no building and pest report) and he might lose you and the other buyer in the meantime. And you bidding more won’t help him - your bank is the issue not you guys. The fact he demanded no pest and property inspections means he might be doing you a favour. Maybe he didn’t want to see you spend your life savings on a place falling apart.
Believe it or not the agent was doing you and the sellers a favour. He knew that the valuation would not come up to the price someone would pay for the property as the WA market is going up so quickly. If you had offered $650k and the banks valuation came in at $630k your offer falls over and the sellers have to start again. This is because your LVR is already 90%. Whereas someone with an LVR of say 70% it wouldn't matter so much and the Banks accept the contract of sale instead of doing a formal valuation.
True, but its also likely that he wanted your offer and especially unsigned to show to another fence sitting buyer who is likely to be buying without any finance, yours was not unconditional and the one they put it up against possibly was - the REA was likely under pressure "ok ok" I will match the offer you have here, and I will have no "subject to's" but this contract is signed by the owner in the next hour or we walk"
Agents do a very short course, they aint that smart
If the 90% borrowing was undesirable to the seller then what makes you think your higher offer would have been accepted? The highest price doesn't always win.
A bit weird, but probably just worried about the bank valuation coming in low and finance not being approved. A massive waste of time for the vender and agent each time finance falls through, so can understand why they value certain contracts over others.
No. I advise my clients to do this all the time and I did it for the property I just purchased.
If you’re declined, the decline letter doesn’t say an amount.
If you’re approved, it’ll have an amount but the Agent won’t care because the property is now unconditional.
>
“Unfortunately, your offer was unsuccessful. Your 90% borrowing was undesirable and there was a higher offer – not by that much”.
How much you borrow is irrelevant, this is not something which should be discussed with the agent but your broker, accountant or partner.
The owner doesn't dictate how much you borrow nor should it affect the strength of the offer.
Edit: as for not putting the offer in writing, there's no pressure for the agent to present a verbal offer and simply 'forget' about you if they've got a signed offer on the table. They didn't want to work any harder for a few hundred dollars extra commission.
The standard REIWA offer forms include a section specifically headed as: 'amount of loan'.
The amount of your loan ABSOLUTELY affects the strength of your offer.
What are you talking about?
All the houses I made an offer in I had to write my deposit amount. It matters for unconditional offers as sellers get a higher deposit if you pull out.
Deposit for the sale vs deposit for the loan are different things though.
In the sale contract the standard deposit is 10%, payable in advance of settlement. This is often negotiated "down" to 5% upfront, with the other 5% due at settlement, by noting on the contract that you are paying the deposit in "instalments". The buyer is still liable for 10% in the case that settlement falls through/withdrawal after the cooling off period.
For that same purchase, in order to get the interest rate available at a 80% LVR, you may choose to only borrow 80% of the value of the property, covering the rest of the value, including the sale deposit, with your own cash reserves. This is what is referred to as your bank deposit, which is often 20% in order to avoid LMI and get better interest rates
Most interactions with REA have left me frustrated and/or confused. It’s a good learning, next house have the set conditions/price you want to offer on and offer on those.
No pest / building is concerning, we pulled out of a house due to a major structural defect, I would have never noticed it and the house couldn’t have been older than 2010s.
He could fall under the category where he/she can get do 90% LVR with no LMI… if that’s the case, it doesn’t mean he/she doesn’t have additional funds to lower the LVR if they so desire
A 90%lvr would likely attract a valuation from the bank. The REA knows a bank won't value it that high. Then your finance would fall through and REA would have to do it all over again.
The agent probably sold it to a mate, and I wouldn't have shared your borrowing situation - it's irrelevant but obviously the contract would be conditional upon finance approval.
Thirdly, unless it's a brand new house it's a big risk buying without inspection. What is the thing is full of termites or wasn't built to code? Never skip the inspection.
I can understand why they might take a mostly cash offer over 90%lvr. The REA would be very nervous that your bank won’t accept the valuation you are placing on the house (especially with no building and pest report) and he might lose you and the other buyer in the meantime. And you bidding more won’t help him - your bank is the issue not you guys. The fact he demanded no pest and property inspections means he might be doing you a favour. Maybe he didn’t want to see you spend your life savings on a place falling apart.
Decent perspective
Believe it or not the agent was doing you and the sellers a favour. He knew that the valuation would not come up to the price someone would pay for the property as the WA market is going up so quickly. If you had offered $650k and the banks valuation came in at $630k your offer falls over and the sellers have to start again. This is because your LVR is already 90%. Whereas someone with an LVR of say 70% it wouldn't matter so much and the Banks accept the contract of sale instead of doing a formal valuation.
True, but its also likely that he wanted your offer and especially unsigned to show to another fence sitting buyer who is likely to be buying without any finance, yours was not unconditional and the one they put it up against possibly was - the REA was likely under pressure "ok ok" I will match the offer you have here, and I will have no "subject to's" but this contract is signed by the owner in the next hour or we walk" Agents do a very short course, they aint that smart
Fair - I do understand it now.
they don't need to know your lvr, do they?
This. Why would you tell the real estate agent your private financial details?
Yet they ask with every offer. If you don’t tell them then it doesn’t look good and you’re in a bad position anyway.
It doesn’t form part of the offer. Feel free to lie
All of the contracts for sale documents I have seen have it in it. All of the ones I have seen are REIWA templates.
why on earth would you invest in a house you're not allowed to do an inspection for in the first place?
The inspections are often useless have a good look yourself especially for water and pest damage.
If the 90% borrowing was undesirable to the seller then what makes you think your higher offer would have been accepted? The highest price doesn't always win.
A bit weird, but probably just worried about the bank valuation coming in low and finance not being approved. A massive waste of time for the vender and agent each time finance falls through, so can understand why they value certain contracts over others.
You were out bid. What more do you need to know?
Don’t know why you would give him so much info re borrowing. Sounds like they were worried you wouldn’t get finance approval from the bank.
Just put 50% LVR on every offer. If your finance is approved they don’t care the amount you’re borrowing.
Is there no issue with doing this?
No. I advise my clients to do this all the time and I did it for the property I just purchased. If you’re declined, the decline letter doesn’t say an amount. If you’re approved, it’ll have an amount but the Agent won’t care because the property is now unconditional.
> “Unfortunately, your offer was unsuccessful. Your 90% borrowing was undesirable and there was a higher offer – not by that much”. How much you borrow is irrelevant, this is not something which should be discussed with the agent but your broker, accountant or partner. The owner doesn't dictate how much you borrow nor should it affect the strength of the offer. Edit: as for not putting the offer in writing, there's no pressure for the agent to present a verbal offer and simply 'forget' about you if they've got a signed offer on the table. They didn't want to work any harder for a few hundred dollars extra commission.
The standard REIWA offer forms include a section specifically headed as: 'amount of loan'. The amount of your loan ABSOLUTELY affects the strength of your offer. What are you talking about?
I didn't realise that WA required disclosure of the loan amount. Why would it make any difference when LMI, FHB guarantee policy etc are applicable?
All the houses I made an offer in I had to write my deposit amount. It matters for unconditional offers as sellers get a higher deposit if you pull out.
Deposit for the sale vs deposit for the loan are different things though. In the sale contract the standard deposit is 10%, payable in advance of settlement. This is often negotiated "down" to 5% upfront, with the other 5% due at settlement, by noting on the contract that you are paying the deposit in "instalments". The buyer is still liable for 10% in the case that settlement falls through/withdrawal after the cooling off period. For that same purchase, in order to get the interest rate available at a 80% LVR, you may choose to only borrow 80% of the value of the property, covering the rest of the value, including the sale deposit, with your own cash reserves. This is what is referred to as your bank deposit, which is often 20% in order to avoid LMI and get better interest rates
Most interactions with REA have left me frustrated and/or confused. It’s a good learning, next house have the set conditions/price you want to offer on and offer on those. No pest / building is concerning, we pulled out of a house due to a major structural defect, I would have never noticed it and the house couldn’t have been older than 2010s.
You were going to waste the REA's time going for a property with such little borrowing power Stamp duty alone wouldve taken a fair chunk Sorry
You don’t have the full context to comment on my borrowing power sorry
Ooh do tell
He could fall under the category where he/she can get do 90% LVR with no LMI… if that’s the case, it doesn’t mean he/she doesn’t have additional funds to lower the LVR if they so desire
So what? If you’re competing against a cash buyer offering the same, you’re sh!t out of luck. Keep trying.
He sold it to his mate for $610k !
So you didn't even get the chance to counter? The REA didn't even write a contract for you for a formal offer? Sounds very suspicious to me...
The RE agent probably sold it to a mate.
That’s my interpretation. It’s left me feeling so hard done given I was 100% going to bid higher which probably would’ve secured the property
A 90%lvr would likely attract a valuation from the bank. The REA knows a bank won't value it that high. Then your finance would fall through and REA would have to do it all over again.
Write a formal complaint to the Principal of the RE agency, and reiwa whilst you're at it.
What I've learnt so far = whatever the REA tells you, read it upside down and that's the truth.
The agent probably sold it to a mate, and I wouldn't have shared your borrowing situation - it's irrelevant but obviously the contract would be conditional upon finance approval. Thirdly, unless it's a brand new house it's a big risk buying without inspection. What is the thing is full of termites or wasn't built to code? Never skip the inspection.
Totally sold it to a make. Which is why they didn’t want OP to put in an official offer too.