8 Tips to Buy in a Hot Market

I’ve been buying property on behalf of clients since October 1998 and in that time I have experienced many hot property markets.  Having moved from Perth to Queensland in 2002 and then to Melbourne in 2006 as well as travelling around the country filming Location Location Location Australia for the last 3 years, it sometimes seemed like I was often in a city that was experiencing very high demand and boom like conditions.  Great news for clients to be buying in a strong market but as a professional property buyer it meant that I could never just rest on my laurels, rather I always had to look at ways to secure the property at the best possible terms and conditions I could whilst being mindful to not pay a ridiculous price.

Buying a property in a hot market can be very intense and for those buyers who are not experienced  in the intricacies of buying real estate it can be very daunting.

But it doesn’t need to be like that as there are a few things you can do to buy well during a competitive market.  If you find yourself experiencing these types of conditions, try some or all of the following tips:

1. Get finance pre-approved – this is non-negotiable! Talk to a mortgage broker or a bank today and get it sorted.  In this type of market you do not have the luxury of time so having this in place is a bare minimum.  Being in a position where you know your budget and can make an offer without a finance clause could put you in the box seat.
2. Ducks in a row – with time being of the essence, having your solicitor and building & pest inspector on standby as well as having your deposit ready so that you can act fast and catch your competition on the back foot are very important factors.
3. Understand value – it’s important to physically inspect as many properties as you can and know what recent comparable sales results have been achieved so that you can keep your finger on the pulse and know what good value is in your preferred suburb(s).  Professional buyers never rely on the agent price guides as their basis for value since they will do their own independent research to form their own view.  In a hot market, you may need to pay a premium for A grade and B+ properties given the additional interest that is likely.
4. Be proactive – once you’ve found the property you like, act fast! Don’t wait for the Open for Inspection but instead call the agent and make an appointment to view ASAP and be prepared to act swiftly if the property satisfies all your criteria.  Don’t be afraid to make the first offer either.  By doing this you are likely to give yourself the chance to have the final right of refusal after all competing offers are considered by the agent.
5. Dangle the carrot – if you have a property to sell then let the agent know that if you’re successful then they could get the second listing.  You don’t necessarily need to give them the listing but it could give them extra incentive to help you.
6. Pre-auction offers – this requires a bit of judgement as a pre-auction offer will either entice the seller or simply reinforce to the owner that the competition is strong!  In the right circumstances, a very compelling pre-auction offer which really gives the owner something to strongly consider might be your best strategy.  If you exceed their expectations for price you may just pick it up cheaper than you would’ve on auction day under a competitive situation.  Plenty of properties have been sold well above the reserve on the day but could have been picked up pre auction if the offer was enticing enough.  Importantly, don’t expect to pick up a steal pre-auction!
7. Buyer Agents – if you are bidding at auction or trying to negotiate a private sale don’t underestimate the value that a professional buyer’s agent (BA) can provide.  At auction, an experienced BA will have a suite of strategies and techniques to “professionally intimidate” the competition from bidding against them and in a private sale their strong relationships with the real estate agents can give them the edge and hear about properties that are off market or require a quick sale.
8. Be flexible on settlement – ask the seller if they need a shorter or a longer settlement to best suit their needs.  If you are one of two or three competing offers but your settlement date perfectly aligns with the owners requirements then this could be your edge.

A final cautionary word on a hot market – don’t get caught up in the hype of it all!  Just because you’ve missed out on a few properties previously it doesn’t mean that you should lower your standards just to get into the market.  Apply a very simple rule… if you wouldn’t buy the property in a balanced or quieter market then you shouldn’t buy it in a hot market either!