Ep 36. How to make an offer with Jared Zak
In this episode, Michelle chats with Jared Zak from Dott & Crossitt about the best way to make an offer on a property
Here’s what you’ll learn from today’s episode:
Jared explains the differences in auction, private treaty and strategies to make an offer
What is a 66W certificate and why is it used
Why different markets require different types of offers
The importance of understanding the agents and vendor involved in the property
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
Jared Zak - Dott & Crossitt
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Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
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VIEW TRANSCRIPT
Michelle May: Hi, and welcome to another episode of the Buy Your Side podcast, the property podcast to help you make smarter property buying decisions. Today I have a great guest with me. He's a returning favourite, Jared Zak, to talk about how to make an offer. How to get your best foot forward to get the deal across the line.
So I want to say hi Jared, how are you?
Jared Zak: Good, thanks Michelle. Thanks for having me back.
Michelle May: Excellent. Thank you so much for being here. You're going to add great value to this conversation because I obviously have one way of looking at how to put a deal together, but you being the principal solicitor and founder of Dott & Crossitt, you obviously have multiple branches across the states and you work in many different markets. So, whilst I am concentrated in the Sydney market, which does have its own micro markets, you obviously have a much broader view across the country. So I thought it'd be very valuable to get your thoughts because I don't know about your clients, but when I'm working with clients, sometimes they have a very set idea of how they want to buy a property. Some people come to me and say, I absolutely want to avoid auction, or I only want to buy off market. Do you come across that sometimes, that school of thought?
Jared Zak: I do get that a lot. Generally, people would prefer not to buy at auction. I guess the message there for some people unfortunately is you may have to. Sometimes it’s not your choice. There's ways, I guess, that you might be able to sort of manoeuvre, a pre auction offer. But if the vendor and the agent most importantly have made up their mind, then you probably have to just go along for the ride. That's probably another topic altogether. I mean, there's nothing to be afraid of with auctions. It's all a little bit of a beat up, auctions are pretty simple and I don't know about you, Michelle, but so many times I get buyers call me up and say, this is in the context of a private treaty or pre-auction, and they say we put our offer forward but the agent has said there's another offer. We think they're lying. And then they get really worked up emotionally about this idea that the agent's lying. But I sort of just say to them, why does it matter? Honestly, they're probably not lying. Firstly, that's my experience. I think there's not that many agents that would really do that these days, but even if they are, why does it matter? Just think about what is the maximum price that you want to pay, and if that buyer, figuratively or not, is higher than that, we let it go. It still stresses people out, whereas I guess at an auction at least you can actually see the buyers around the room. So it takes away that sort of uncertainty and that little bit of anxiety about not really knowing who the true market is out there.
Michelle May: I would 100% agree with you. I think auctions, can eyeball your competition. There's no room for cloak and daggers. It is the floor that decides what the property will go for ultimately. Sometimes you're up against an unrealistic vendor who's got an incredibly high reserve, but you can deal with that as it comes.
Jared Zak: But it's interesting, the auction can sometimes be a place of realisation for the vendor too. When they're there and they think, wow, maybe the market you know, isn't quite as strong as I thought it was, or maybe my house isn't quite what it's worth. And that's when you can probably get a moment where the vendor might compromise or start to see sense.
Michelle May: Absolutely, and it has happened to us on more than one hand, that we have bought under reserve because we were the top bid at the time and we got the first right of refusal, if you like. It is tough. It's not nice to do. But you have to do it to get the best result for your clients and at the end of the day, that's who we are working for, the buyers. Well, in your case you work for vendors as well, but you know, for my buyers to get an incredible result for them on the day is fantastic.
Now, what you said about when you're making offers and you don't know whether there's another offer on the table, I have that issue all the time with my buyers as well, and obviously I work with agents on a repeat business, and I have done over many years, so I know how many of them work. It is a very risky move for an agent to make up a counter bid if it's not real. A it's illegal, but by the by it's very risky because what if you as a buyer do not increase your bid? Then they're left out hanging, aren't they? And it's going to make them look absolutely stupid, and you're going to walk away from that deal, because they've just lied to you. So I would say that as a whole, I don't think there's many agents really who are prepared to risk it for potentially only a small increase in the sales price.
Jared Zak: Yeah, I agree. I don't think it happens that much at all. I think at worst or I think what may happen sometimes is the agent may embellish how prepared the other buyer is. That sometimes happens and sometimes it's deliberate, sometimes it's wishful thinking. They just think the other buyer's ready to go. And I don't know about you Michelle, but sometimes I actually deliberately tell my more sophisticated buyers to puff your chest up and tell the agent we are ready to go. If finance is pretty much there. Solicitors gone through the contract and the strata report's all done. Present that even though that's not actually necessarily true, even though we're actually a little bit behind the ball, but as soon as we get some kind of bite on the price and they say, okay, if you're ready to go, the vendor probably going to accept that if you can come up a little bit, they come back and say, that actually worked. Then it's, then it's like basically super, super speed. We have to go and do all the things that we said we'd already done.
Michelle May: That's risky. You see, my strategy is different.
Jared Zak: I think you've gotta have a good team. When I say to them, look, should we review the contract and go and get the strata report and all that kind of stuff, cause those things actually cost money, as you know, it's probably somewhere between $500 - $1000, when you factor in the pest and building, the contract review, the time, etc, I mean, in a preferable world, you would know or have a stronger indication whether your bid's going to be accepted before you go and spend that money.
So I actually do tell my buyers a little bit like that moment in Braveheart. Just wait, let's just see, let's put an offer out there. Don't be dishonest with the agent, but don't indicate that you're basically at ground zero. Tell them you're ready to go and we can transact within 24 hours and normally we can anyway, we can move that quickly.
Michelle May: Yeah, I think you make a good point there that it's the conversations that you have with the real estate agents, whether it's going to auction or private treaty, an off market being private treaty also, and no matter what market you're in conversations with, the agents are always key. The more questions you ask, the better you are prepared to make an offer or to wait, because sometimes making an offer is not the right thing to do. If you have an unrealistic vendor and it's an auction campaign, wait and sit on your hands. Wait until auction day and then, particularly if it's being underquoted, because let's face it, that is something that does happen on a daily basis.
Go in prepared and then make that opening offer that knocks out 90% of your competition. You know, boom. Everyone's out. If the vendor wants a really high amount of money, you're just going to give the vendor ammunition to say to the agents, well, look, this person's already prepared to make this much of an offer prior to auction, so I'm valid in what I'm saying. I think my property is worth that much more because a lot of vendors, particularly early on in the campaign, they want to see the agent do their job. They want to see how many people come through the property. They want to hear that feedback. So quite often I will hold off, say it's an auction campaign, which is typically four weeks. I want to wait two weeks so that the agent and vendor have that time to get that feedback from the market, before I then have the pointy conversations with the agents to say, Hey Jared, what's your feedback been so far? How's the vendor feeling about that? How are you feeling about that? Because, then again, it becomes really important what kind of agent you're dealing with.
Because if the agent, and trust me, this is absolutely 100% true, agents tend to repeat the same process over and over. So there's some agents who literally can't put a deal together to save themselves honestly. They couldn't organise a piss up in a brewery, so to speak, and they run everything to auction no matter what the market, whether it's the right property for it, they run everything to auction.
And there's other agents who are massive deal doers, like you put an offer in front of them and they'll get it done because they're all about volume and they're all about speed. And we get our clients ready ASAP and go, boom, we've gotta get this done before anyone else or the other buyers even had a chance to consider whether they like this property enough. We get the contract reviewed, we do all our in-house due diligence, invest in the strata or the building and pest because we know that we're going to get it done. So it's really interesting, isn't it, that there's so many moving variables.
Jared Zak: It's complex. As I was sort of saying to you before we came on air, how you put an offer in, whether it's pre auction or private treaty, depends on so many different things like where the market is, eastern suburbs versus western suburbs, completely different. New South Wales versus Queensland, that's just different worlds. A hot market versus cooling market, completely different. Deceased state vendor or elderly lady vendor, completely different to a younger couple in terms of how you present your offer and when and all that kind. It is very bamboozling I think for some buyers, and I think, it's probably really good in a lot of cases to get someone like yourself to guide the buyers through the process and say, look, this particular property, because you've got X, Y, and Z happening, this is the strategy we're going to do. Because we get that question so many times from buyers, do I put an offer in? I say, well, firstly, tell me all of these things, and then we can work out a strategy.
Michelle May: For example, you just mentioned, deceased estate. Gosh, how long have I been doing this? 15 years. I can count on one hand the number of deceased estates that I've been able to purchase prior to auction when there was one more than one beneficiary involved. Because someone passes away, leaves the house to the family, there's a couple of siblings, cousins, whatever. They all want a piece of the pie. They are never going to agree on the one figure that is in front of them. So if you are in that situation where you're the buyer, you are literally wasting your time and I hate to say this, but in some way feeding into the greed of some family members. So you may as well just wait. Let the guide be the guide. And then pounce at auction. And if you're too nervous to do it, hire someone else to do it.
Jared Zak: There's another reason why I think there's the propensity for deceased states to go to auction. There's, there's definitely the bickering beneficiaries and family members dynamic, there's definitely that. There's also a legal reason. The executor will get more legal comfort if they let it go to market. They don't want their decision because they have a fiduciary duty to all the beneficiaries to maximise the sale price. Now, in the first week, if they get an agent comes through and says, look, trust me, we don't want to get to the auction because this is the bid right here. They're not going to be so sure, they don't want to be sued by a family member down the track and said, Hey, you didn't do your fiduciary duty, you didn't maximise the sale price. They're just going to sit back and say, you know what, thanks for that but I'm going to hide under the comfort of the auction.
So it does, it doesn't have to be that way, you know? You can have executors who are their own people and they can make decisions as well as anyone, as long as it's in their best interest. But I think most executors would prefer to go to auction.
Michelle May: So I mean, look, that's one reason. So if you've got people coming to you saying, Hey, we want to put in an offer, that would be your advice, and that would be my advice also, right? And that's just one situation. So I came across something surprising the other day where for the first time in possibly 10 years, I got a cooling off period. I was like, oh, really? That's fantastic.
Jared Zak: Yeah. I got one as well.
Michelle May: Yeah, if you're in the inner ring of Sydney, it's very, very unusual to get a cooling off. Obviously, there's no cooling off normally prior to an auction campaign because the vendor wants to lock you in because otherwise they might lose all the other buyers in the process whilst you take your five days to think about it and do all your due diligence. But in a private treaty campaign, in a hot market, which is very rare to have a private treaty in this inner ring, You want to put your best foot forward and put your best offer forward. So most people end up waving that cooling off period and offering what they call a 66W to the contract. Do you want to run our listeners through what that is and how that actually works?
Jared Zak: Well that's spot on. And I think certainly the message that that is just absolutely par for the course in the metro Sydney area. A 66W certificate, it's a certificate actually issued by the solicitor or the conveyancer for the buyer. And it has a legal effect of waiving the cooling off period as if the buyer had bought at auction. So that cooling off period that we're talking about, that's actually automatically given by law in the Conveyancing Act. Section 66 T I think it is. And then 66 W waives it. As common as they are in the eastern suburbs, they're probably equally rare in out sort of the Penrith, Western Sydney areas where I've also got a practice as well. They, they're quite rare out there. They do happen every now and then, but it's just a market thing, I think it's a cultural thing. It might be something to do with the demand. I'm sure it probably does as well.
How you sort of put an offer in in Penrith because you've got a cooling off period generally, you probably want to make your offer and sign a contract pretty quick. You probably don't want to muck around too much because that's what the cooling off period is for.
Michelle May: Yeah. And the cooling off period, just so that people know, the cooling off period is usually a period of…
Jared Zak: It's five business days. But it can be extended in writing. And certainly we were seeing that happen a lot when the banks were having those big delays, during Covid. And so pretty much almost every coming off period we had we would straight away get it extended to 10.
Michelle May: Can you get it extended on day five? Say you make the offer on Monday, on Friday it runs out. Is that close of business Friday?
Jared Zak: There's no guarantee the vendor is going to agree to it. And so you have, as a buyer's solicitor, and as a buyer's agent, you have to make your case to the vendor. You have to sort of say, look, this is what we've done the last few days. You know, the loan applications in. We are pre-approved. We've had the pest and building inspection. The contract is fine, but the valuer, he came yesterday, but he hasn't written up his report. Now, if you sort of can present a case, the vendor's going to be like, well, we're almost there. I'll give you another two or three days. But the vendor could say no. And we've had plenty of times where the vendor said no, we said five business days and that's what we meant. Now what happens in that case, it's probably a pretty important point for your listeners. What happens in that case is the buyer will actually forfeit a small amount of money, or it's actually reasonable sum money. It's 0.25% of the deposit. So certainly not the 10% deposit. It's a 0.25% deposit. So that's with an average house price, that's probably about $2000 - $3000. So it's going to hurt, but by the same token, the vendor would say, well, that's the price that you pay for me to take the property off the market. because the vendor cannot market the property during the cooling off period. It's yours if you want it.
Michelle May: So on a million dollar property, that's $2500 that you are walking away from. And that is payable and due at the point of you signing the contract, isn't it? At the point of exchange, just like a normal 10% deposit would be.
Jared Zak: Yeah. They'll want you to pay that 0.25%. Occasionally they might say, look, as a gesture of goodwill, why don't you pay the 10% deposit or the 5% deposit, and then if you do need to pull out, we will refund you the 9.75%.
Michelle May: Oh, I'm not sure I feel good about that.
Jared Zak: I don't really mind. A lot of clients go, I'm not sure about that, but I don't really mind it. The law is very, very clear. There's no black and white. If you need to pull out during that cooling off period, you can, and that money is refundable.
Michelle May: Geez. As long as it's in my bank, it's relatively safe. I mean, you know all things considered.
Jared Zak: No, you're right. That's generally the principle that we work on. Occasionally though, we used it as a bit of a lever, to get the cooling off period. So we had a property which is on the North Shore. Cooling off periods is as rare as duck's teeth there, cause we were getting money from overseas and it was just going to take longer than we thought. So we managed to convince them. But one of the things we said is, look, we're good to go, we're all going to be approved, we're happy with the contract. And guess what? As a gesture of goodwill, we are actually going to put down the 10%. now, notwithstanding that if something does happen, if the money doesn't come in time, whatever. We'll get the 9.75%. And the vendors seem to like that.
Michelle May: So again, you make a very good point, and obviously you've got the deal across the line that way. So I think it's like a game of chess, isn't it? And I tell you what, I have done so many transactions, it's still not a job where you can just put your brain on zero and just do it. You know, it's not like checking out things at the grocery store. Every single transaction is different, even though the rules essentially are the same because you're dealing with all these moving cogs and people, let's not forget people and their motivations. You have to really consider and look at every angle before proceeding. So I think if nothing else, the takeaway for people who are listening to this from my perspective would be do not rush into it. I mean, you move with speed, but don't rush it. Really consider, if you are keen on making an offer, why are you keen on making an offer? Is it really the best way to do this? Would you add anything to that, Jared?
Jared Zak: That's a great way of describing it. Like sort of move quickly, but don't make any big moves without carefully considering them. And that seems like a contradiction, but that's sort of what you have to do. It's tough. Even in this market, which is supposedly softer. It's still very tough.
Michelle May: Because honestly what I'm seeing is that the A grade properties are still moving, what I mean is quality location, quality floor plan, quality building, complex, whatever. School catchment. If it's a three bedroom house in the Inner West or in the East, it needs no work. You can bet your bottom dollar that you've got competition.
Jared Zak: We had a property this week. It sold this week. It was bought by my client, the vendor, two years ago. So sort of right when the house prices were, I guess supposedly at their highest, and it was a big prime property in Mosman, so a rare sort of trophy house, which are I believe quite scarce at the moment. And they sold it for a $500,000 profit, and I think that's just to do with there being a shortage of supply still for those sort of trophy houses.
Michelle May: That just shows you, once again, that the headlines are not really reflecting the true market once you dive into it. So, well done to your vendors, I should say.
Well, I think this has been a really great episode, trying to talk you through, what are the things you need to consider. If you have any questions, please get in touch at hello@buyyourside.com.au. But if you are in need of a great solicitor, Jared, how can they best get in touch with you?
Jared Zak: So our company's Dott & Crossitt Solicitors. And on our website there's a get a quote button that you can see on the very top or equally if you want to give me a call, I don't mind. 0449 773 105 and we can get you a quote or chat through any property problem that you might have.
Michelle May: Thank you so much, Jared. It's been a pleasure having you on. I hope you come back for another conversation soon
Jared Zak: I'd love to thank you.
Michelle May: Thanks for listening and until next time.