05 Nov How to structure offers to suit the market conditions – Nhan Nguyen
Property investor and mentor, Nhan Nguyen, from AdvancedPropertyStrategies.com, tells us how to structure offers to suit the market conditions and when to do quick or long settlements.
Kevin: A deal is a deal is a deal. Well, not always. You have to structure your deals to suit the market conditions. That’s what I’m going to talk to Nhan Nguyen about right now. Nhan, of course, is from AdvancedPropertyStrategies.com.
Hi, Nhan. Good to have you back on the show.
Nhan: Thanks Kevin. Thanks for having me.
Kevin: Tell me about this. How do you go about structuring those offers, and how do you make them different?
Nhan: Structuring an offer is a critical thing in the marketplace. Two or three years ago when the market was flat, in Brisbane especially, you could get really, really good terms and conditions. You might be able to pay asking price and get long settlements. These days, if the market is hot and everyone is going to auction, for example, you need to be willing to settle quicker and use shorter contingency clauses or escape clauses.
What does that mean? In the past, you could have gotten away with probably 30 days finance and maybe another 30 days settlement after that, but these days, if it’s a good property and you know it’s good, you might have to go and settle quickly. You might have to do 14 days finance or 14 days building and pest and settle maybe 21 or 28 days, just giving yourself an edge to the marketplace.
You have to get your finance in place, get yourself pre-approved, get your entities or your companies and trusts set up already if you’re looking at buying those entities. It’s just really about being organized, knowing exactly what you’re looking for, and going in knowing that other people will be wanting to buy those properties, as well.
Kevin: I think the point you made there is the key one. That is being organized. Be ready and make sure that you have all these plans and strategies in place so that you can be quite flexible, because it’s not just about market conditions. Sometimes it’s about the property, or it could be about special conditions for a seller, as well, Nhan.
Nhan: Absolutely. Some sellers, if they’re going to market, some of them will have high expectations, and the only way if you really want to get a good discount on the price is maybe giving them better terms. If you’re wanting longer terms, you might have to increase your price or pay more than what they’re asking. If you want longer settlements, you might have to adjust it that way, but it depends on the expectations of the seller.
I’m looking at one at the moment whereby they are going to auction in about three and a bit weeks. Ideally, I’d want to buy it before auction at my price, so I’m going to go in with a sharp number – very, very low, as low as I think I can get it for – but I’d have to be settling quickly.
Kevin: Why are you doing that? Why aren’t you prepared to buy it at auction?
Nhan: That’s the thing. Auctions create a competitive environment, and the last thing you want is to buy under pressure and have people bid you up and also buy emotionally. For me, it’s either an investment or a development. An investment is something I’d hold, or a development is something I’d build and sell, for example. However, in this instance, I don’t want to be competing against somebody and waste my time turning up at auction if it’s going to go for $100,000 over.
If I want the property, I need to be the sole negotiator, and not a lot of people put in offers before auctions, so it’s a good negotiating strategy, and if you don’t get it, you may turn up at the auction or not.
Kevin: Of course, there are times when you’ll have to be affording the seller a long settlement but for whatever reason, you may need to get in quickly so therefore, you can offer them some compensation back in return for allowing you early access.
Nhan: Absolutely. That just comes and goes depending on what you want to do to the property, whether you want to renovate it straight away, or you might just want to put an approval on it.
Getting onto the property or into the property may be not a necessity. It just may be certain timeframes or certain terms and conditions that you’ll want. It’s critical to be able to negotiate that upfront rather than if you go to an auction, you’re running out of time and you’re under pressure to make a decision on the day, it can go against you. Yes, that’s why real estate agents use auctions because it forces you to have a deadline to make a decision, doesn’t it?
Kevin: Just to round this out, what are your top tips in structuring a good offer that is going to meet the market conditions, Nhan?
Nhan: Yes, the first thing is, like I mentioned there, being sharp on your terms and conditions of finance and/or building and pest. You might have to sharpen that up. It might be instead of 28, it could be 14 or 21 days for the finance and building and pest, and short settlements, as well. If you can do a 21 day settlement, a 14 day settlement, or around that timeframe, it allows the agent to be incentivized to present your offer.
Make sure you put it in writing. It’s one thing to verbalize it over the phone or face to face, but when you put it in writing and you put a deposit check with it, that makes it a lot more appealing.
Kevin: Nhan Nguyen, thank you so much for your time. Nhan, of course, is from AdvancedPropertyStrategies.com. Thanks for your time, mate.
Nhan: I appreciate it, Kevin.