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Empower Wealth Blog post by Empower Wealth

Buyer’s Tip: Mistakes to avoid if you’re serious about that dream home

We have had a few buyers lately who have been searching for their own home. Our Buyers Agents do help home buyers often, but the blend of home buyers to investors that we work with is not an even blend  – we tend to work with a significantly higher percentage of investors. We were prompted to write this Buyers Tip though because home buyers can adopt a slightly different approach when shopping for property and they should place a value on finding a property which meets all of their needs and most of their wants.

We’ve worked with couples who have taken more than six months of active searching to find the right property for them. Some have taken up to nine months on a couple of occasions. What does this mean? Is their search too restrictive? Are they too fussy? Not necessarily. They may have very specific needs and if they have time and patience on their side, then it’s appropriate to take months to find the right home. The biggest mistake we’ve see home buyers make is applying greed or scrutiny to the advertised price of the property and letting it slip through their fingers when they could have bought it within their budget. Everyone likes a bargain but the taste of the lost opportunity lingers for far longer than the thrill of a few thousand dollars discount.

 

Investments are one thing – but homes are another.

With a slowly but steadily rebounding Melbourne market, a festive season upon us and a reduced interest rate adding to happier buyer sentiment, it’s plausible that home buyers might find the buying conditions tougher over the next few months.

One thing we are encouraging some of our clients to consider is pouncing on a property which meets their selection criteria early. Most good properties in the inner and middle ring suburbs in Melbourne go to auction. Not every vendor necessarily likes the idea of auction and in many cases, they may have bought elsewhere and would like a faster sale. Why do buyers hold back and go through the tedious auction process of paying for building inspections, raising bank cheques, and bidding on the day only to get pipped by another buyer when they could nail the property on the weekend they find it? Maybe it’s because they don’t realise how readily this could be done. It’s not advantageous to buy before auction every time, but the following situations are examples of when it MIGHT be the right time to secure a property prior to auction;

  • It’s your dream house, the vendor’s expectations match your budget, and you absolutely, positively have to have it
  • The vendor’s expectations are reasonable and the price that they would accept stacks up for you
  • The property has competition but the other buyers aren’t quite ready (ie. still sorting finance, haven’t completed building inspections etc)
  • The property doesn’t have competition now but it will have by auction day

This last example is a great one to be mindful of over the January break. Many vendors start advertising their property over January for an early February auction but while half of Melbourne is down on the coast or wrapped up in the festive season, they aren’t really focused on property. Once people go back to work and the new year gains traction, buyers get active in the market again. It’s safe to say that the first two weeks of January are pretty quiet in a real estate agency office though. This is the time to think about securing a property prior to auction if it addresses all of your criteria.

It’s a very delicate process to sound out an agent about the vendor’s expectations for their auction property. You are effectively asking the agent to tell you the reserve and in our Melbourne auction market, this secret is guarded like a coca-cola recipe.

You need to establish with the agent that you are genuine, ready to buy now, able to complete the transaction without conditions and difficult clauses, and that you understand the real value of the property. Most importantly, you need to find out whether the vendor is open to offers prior in the first place. It is simple, but not easy. The first question in this situation should be “Are the vendors open to offers prior?” The agent will say one of three things;

  1. “No. They really are keen to take it through to auction.” (This answer means that the agent feels he/she has it covered with enough genuine buyer interest to make for a good auction)
  2. “Yes, they are” (This is your green light to keep talking)
  3. “Oh, look, well,…. We will present any offer. You never know.” (This is your red light. It means that the agent is just using your buyer feedback to put a peg in the ground and give his vendor some quality feedback. And legally, all agents have to present any genuine offers regardless).

The trick is to either buy it swiftly and decisively at a fair price with a genuinely committed vendor, or to keep your powder dry and go through to auction. What you DON’T want to do is show your cards at this point because the agent will tell the vendor and may well tell other buyers about your position and offer.

If this process seems daunting, talk to an expert who can guide you through the maze and even bid/negotiate on your behalf. That’s what we do – every day!

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