The Costly Mistakes Most Buyers Make - November Market Update
Written by: Rich Harvey, CEO & Founder
Negotiating a real estate purchase is a bit like a dance where both partners are trying to lead.
The buyer is trying to turn one way while the seller’s agent is expertly edging both of you in the other direction. They’ve been around a dance floor more times than you can imagine and so, if you haven’t, chances are you’ll end exactly where they want.
Or, you’ll both end up on the floor and the evening will be ruined.
Clunky dance metaphors aside, you don’t need me to explain again why a buyer’s agent is worth their weight in gold. I’ve explained how they seek out the very best deals, often times ones that never hit the open market, and arrange every aspect of negotiating its purchase on your behalf, independently and with expert know-how.
So, instead, let me walk you through some of the biggest mistakes I’ve seen buyers make in the purchase process when they go it alone.
Showing your cards
Some clients who come to me do so for no other reason than to avoid the awkwardness of having to deal with a real estate agent.
They hate the game-playing, psychological warfare, occasional slight-of-hand (the strategic kind, not the illegal kind), uncertainty and tension of it all. And that’s fair enough. Having negotiated with countless realtors in my time, I can see why some people don’t enjoy it as much as I do.
For those going it alone in the property purchase game, one of the top mistakes they make is revealing their cards – often inadvertently.
Seemingly innocent conversation can give an experienced sales agent all sorts of information. Buyers can spill on their timeline – how soon they want or need to buy and settle and be in a property. This can inform an agent of the urgency or otherwise of a buyer’s scenario. For example, they can speed up a negotiation and increase the pressure if you’re in a hurry.
Many also willingly reveal their walk-away price, or the absolute most they’re willing or able to spend on any property. Sharing this information means the agent knows exactly how far they can push you. And in a market where there are far more buyers than sellers, this is a huge disadvantage.
Share as little information as possible. When asked what you think it’s worth, refer to accurate market estimates if you have to. If you’re prodded about how much you’ve been pre-approved for, don’t respond.
Not being prepared
Many buyers make an offer and sign a contract without having done any preparation for what comes next. They’re suddenly caught at the start of a long list of ‘things to do’.
Invest some time now in making sure you’re ready to make the purchase process as smooth and as quick as possible.
With the recent sharp increase in market activity after a prolonged period of lulls in most cities, many lenders have been caught on the back foot. Settlement times have blown out and buyers are experiencing delays on the finance side of things.
Get your pre-approval now to make this big part of buying speedier. It also gives you certainty about what you’re able to spend.
Take some time now to investigate building and pest inspector you can engage when you’ve found a place you’re keen to buy. The contract condition on building and pest issues is usually seven days and the experts who conduct these checks are pretty busy at the moment. You want to be able to move fast.
Similarly, do some research on a good conveyancing lawyer that you can send your purchase contract to on day one.
Most sales agents are above board and do the right thing, but don’t just take recommendations for inspection services, conveyancers or mortgage brokers from them. It’s not only good to shop around for price and best fit when it comes to professionals, but it’s wise to have control when seeking independent advisors. A bit of separation from different parties in the process is a good thing.
There are some instances when a polite but firm deadline on an offer can work – usually in a buyer’s market where the power balance is in your favour.
But being aggressive and overly demanding is a sure-fire way to put everyone offside. In a market like Sydney at the moment, where demand is boiling over and supply remains tight, chances are there’ll be plenty of other people to negotiate with.
There’s a difference between being direct and being ‘a jerk’. And remember – don’t bluff unless you’re able to follow through on your words.
Being overly emotional
Buying a home is an emotional process by default. Try as you might, you can’t help but wander through a prospective property and imagine you and your family living there.
It’s fine to like a place and to want it. It’s dangerous to desperately want it at any cost, leaving yourself open to being squeezed for every cent you’ve got. Or your bank is willing to lend you.
You need to keep a cool head, otherwise you run the risk of paying more than a place is realistically worth, and potentially of overextending yourself.
When the market is moving quickly, there’s obviously a need to act without delay.
But jumping in head first is risky, leaving you open to not really knowing what you’ve signed up for. Due diligence is essential regardless of what the market is doing. No deal is worth being caught out down the track.
Do your homework on the property itself, from its suitability for your broader strategy or home needs and wants, to its structural integrity. Investigate its liveability – is there a noisy neighbour, a particularly bright street light that shines in the window, a flight path overhead that’ll drive you crazy?
And of course, be intimately aware of the area you’re buying in. What are the schools like nearby? Is there infrastructure planned for the future that will affect the property, negatively or otherwise? Any major developments you should be aware of?
Making ridiculous offers
We’ve all seen those movies where some slick businessman walks into a boardroom and charms everyone into accepting a crazy deal that suits him and no one else.
That’s almost never a property buyer, especially when the market has some heat in it.
If a vendor is desperate and needs a quick sale, and circumstances dictate that a single buyer is likely to swoop in and get a property for a steal, then making stupidly low offers could work.
But those situations are rare. Rocking up at an open home for a good property in a good suburb and offering peanuts is likely to result in you being laughed out of the room and not much else.
If you’ve done your homework and know the place has been on the market for a long time, it’s gone to auction but been passed in, and if it was listed a little while ago by the same vendor but didn’t sell and is back on the market again, for example, then you might be onto something.
If you’ve had a cheeky chat to a few neighbours after an open house and they’ve given an indication that a quick sale is needed, you could be in a position to haggle.
Going it alone is possible, but truly understanding the psychology and strategy of property purchasing takes experience. In most instances, passing the hard work over to an independent buyers’ agent makes good sense.
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