A buyers’ market presents all sorts of opportunities for property buyers. Sometimes, however, it disguises a whole lot of pitfalls for the inexperienced, overwhelmed or time-constrained buyers – the biggest one being the hidden danger of either buying the wrong property or overpaying for a property. So, here are the 7 mistakes property buyers make that cost them in a buyers’ market.
Really? I understand your scepticism…But, believe me, it’s a very real common issue amongst most buyers, especially in a buyers’ market. Property buyers often believe they’ve got the upper hand in a buyers’ market but it’s not always the case.
Regardless of the real estate market conditions, you still need to remember that when negotiating for a property you’re potentially up against someone like me who does this for a living. And the thing is, buyers are more driven by emotion than they want to believe. Whilst, the selling agent just wants to get the deal done and doesn’t really care whether the buyer overpays or whether or not it’s the right property for the buyer. Hence, why it’s a smart move for a buyer to engage a buyer’s advocate like myself to sit in their corner and represent their best interests independently.
Mistake #1 Overconfidence
This is a big issue for some buyers, particularly when they feel that they are the ones in power. They could have overconfidence in their ability to negotiate and in their ability to recognise a good property in the first place. This heightened optimism puts buyers in danger of overpaying for a property. One thing I know for sure is that when buyers get over confident, selling agents really want to make them pay as no one really likes overconfidence…
Mistake #2 Buying before auction
Sometimes buying before auction can be a good idea, but if it’s because the selling agent has suggested you do so, be careful. We see a lot of selling agents convincing buyers to make pre-auction offers when they have only one real buyer. Buyers often feel like this is their opportunity to avoid competition but what they are really doing is negotiating like blind Bill! The danger of overpaying for a property is never greater than when competing against shadow-buyers who don’t even exist.
Recently we were engaged by a couple to help them negotiate on a property prior to auction. They’d been encouraged by an agent to make an offer in the last days of the auction campaign because “another buyer was about to buy it”. They then called us as they immediately realised that they were out of depth. There was no other buyer and we bought it on the night of auction, after it passed in, for less than the offer they had made before they engaged us.
Mistake #3 Missed real estate buying opportunities
One universal truth is that pretty much all of us we want more than we can afford. A recent client was worried that they couldn’t afford our fee because their budget was already stretched. Oddly enough, before meeting us, they’d stopped bidding before buying a number of properties that they could have afforded. When we debriefed with them, we could see that they weren’t looking where they really wanted to buy because they thought they were out-priced. Ultimately, they were on a path to buy the wrong property in the wrong location – all due to an incomplete picture of the possibilities available to them. Within 3 weeks we had snapped up a gorgeous cottage for them in a blue-chip suburb. They’d never thought that was possible.
One reason it was possible was because the selling agent had been over quoting the property. Yes, it does happen. They got the price wrong. We paid LESS than the quoted price. Here’s another situation that creates a danger of overpaying for a house – automatically assuming a property is worth 10% more than the agent is quoting. We bought this property for $1.275M. It had been quoted at $1.3M. You do the math…
Mistake #4 Fear of missing out from frustration
If you’ve found a property you love, it’s normal to be nervous about other competing buyers. Fear of missing out starts when we have this little voice in the back of our heads telling us that someone else with more money could come and snatch away our dream home. Even in a buyers’ market, the fear of missing out can cause many frustrated buyers to overpay. One of the benefits of engaging a buyer’s agent or advocate is having a voice of reason to protect you from the danger of overpaying for a property.
Mistake #5 Confused by market inconsistencies
There’s a lot of inconsistencies in a buyers’ market. Some properties sell for unexpectedly high prices while others languish. How does the typical buyer who on average buys a property once every 15 years know how to read this and work out what to do next?
Many buyers under these circumstances do nothing, which is a real shame because they often let good opportunities go. Floundering around doesn’t cost buyers in a soft market as much as it does in a hot market, however a lack of direction and focus might. Because when the market turns again, as it will at some point, there’ll be little warning that you’ve hit the bottom. Prices will go up in a rush, like they have done before. All of a sudden everybody will take action rather than sitting on their hands. Then there will be a very real danger of overpaying for a property!
Mistake #6 Low real estate stock can distort the market and cause confusion
Here’s something about a buyers’ market that really irritates me: in the areas in which we buy there is less property on the market. Not only that, but less quality property. You see, when owners feel that they won’t get their price (courtesy of all the negative headlines), they simply won’t list. In much the same way that buyers are waiting for prices to fall, sellers are waiting for them to take off again.
So, buyers who aren’t in the market year in and year out won’t necessarily recognise the lack of quality and face the danger of overpaying for a B-grade property.
#7 Not prepared to listen or accept professional advice
It’s true that a lot of people think they should be able to buy a property without advice. And it’s true that a lot do. They might think they know it all, or they think that what they don’t know won’t hurt them. But it can.
Let’s put it another way. What do you do for a job? Have you put in years to study for a qualification? Have you developed your skills over years of hands-on experience? Have you been taught by the best in the business? Can a property professional like us who lives and breathes property for a living do it as well as you? It’s important to recognise that you could be inadvertently making costly mistakes and are very much in danger of overpaying for a property. Awareness is the first step.
Why Use a Buyer’s Agent in Melbourne: At Your Australian Property, we offer comprehensive end-to-end support from identifying and analysing your selected properties to dealing with selling agents, attending property inspections, purchase negotiations and / or auction bidding on your behalf. And because we have our fingers on the pulse, possess unlimited market knowledge about the Melbourne Property Market, know what questions to ask and what information is relevant. Our expert and independent buyer’s agents in Melbourne, will take the time to understand your situation, exactly what your requirements are, your time-line and preferred budget, then create a tailored property strategy to get into your ideal property, fast!