You’ve found the house of your dreams, you want to buy it, the agent seems receptive, you make an offer…
And then nothing happens. You are in the dark and getting frustrated. Is your offer accepted or not? Has the agent even given it to the vendor? Are they using it to get another buyer to make a higher offer?
All these thoughts have gone through the minds of property buyers who find themselves in this situation. And it happens more often than you might think. You see, what these buyers hadn’t realised is that there is a hell of a lot of behind the scenes work that goes into determining exactly the right time to make an offer.
There are times when it pays to go slow and there are times when you need to move fast or you’ll miss out. So how do you work out which is which? Firstly, you need to get yourself ready to buy and you need to know exactly what your ideal property is so that you don’t act too fast and end up buying the wrong property.
- Get your finance pre-approved
- Research your area and inspect as many properties as possible
- Make sure you can afford what you want, where you want to be
- Research and decide on plans B & C
- Gather information on recent sales so you know market values
It’s important to recognize that not all agents employ the same negotiation tactics. How the agent is managing their vendor’s expectations is a crucial factor to consider. Some agents are desperate to get an offer because they need one in order to be able to “condition” their owner. In these circumstances your offer is unlikely to buy the property and often you’ll get no feedback for days. Some agents will try to call your bluff by talking about some nebulous “other buyer” and their vague offer. However, an agent who is about to sell a property is usually very clear with their instructions to a prospective buyer, because those who are dealing with serious buyers and a motivated vendor won’t muck around.
When to move quickly:
- The asking price is very reasonable, in fact you think it might even sell for more
- The agent is telling you that you need to make your offer in writing, with a set deadline – and they are very clear about the process and what you need to do to buy it
- You can see at the open house that buyers are swarming and there is genuine interest
When to slow down:
- A high asking price – this generates no urgency with buyers
- An agent who clearly has no idea where their vendor’s price expectations are
- The agent is nervous and contradicts themselves in subsequent conversations (keep notes!)
- The agent can’t give a clear answer when you ask how they will handle offers
- The open homes are quiet
Whether you decide to offer fast or slow, you need to be ready to buy when you make that offer – just in case you do get a quick “yes”. There is a lot of due diligence that needs to be done before you sign a contract. If you make an offer before you are ready to exchange contracts, you run the risk of getting gazumped. Now that’s a whole other topic!
|CASE STUDY |
How Good Deeds buyers’ agent Dean Radice used these principles recently:
Our clients phoned us asking for help with buying a waterfront home. They had originally looked at this property at the start of its auction campaign and, based on what the agent was quoting, thought it was out of their budget. Some weeks later, when they realized that the property hadn’t gone to auction, they decided that they needed to find out whether it was within their reach after all.
They made it clear to us from the outset that this was their dream home and they would stretch themselves in order to buy it. They engaged us to evaluate the property, to advise them on what we believed it was worth and how it rated ‘investment wise’.
After doing our pricing research and having discussions with the selling agent, we could see clearly two reasons why the property hadn’t yet sold:
And as we continued with our due diligence, we uncovered a few things that had a negative impact on our recommended purchase price.
So what we were left with was a slow moving vendor with a high price expectation, an agent who was doing their best to manage a difficult situation and a client who was impatient to buy the property (and even pay more than we recommended!).
Dean identified that our clients were the only buyers ready to exchange contracts, however they were not willing to pay the amount that the vendor was holding out for. So he had to negotiate slowly in order to give the vendor time to adjust their expectations.
The initial offer was respectable, but not at our client’s maximum and the vendor took her time to respond and eventually reject the offer. Dean’s experience told him that this was a normal slow moving negotiation, however, our clients were becoming increasingly impatient as they had been looking for a long time and didn’t want to risk losing the property to another buyer.
After several negotiations with the agent, Dean was confident that they had arrived at a figure that the vendor would accept, which happened to be at the top of our client’s budget.
Our goal is always to buy the right property and pay the right price. So, with this in mind, Dean spoke with our clients and said:
“I recommend that you have patience as we have been able to negotiate the vendor down $500,000 and I am confident that you could pay even less if you hold out. However, I need to be clear that by doing this we are risking the potential for another buyer to come into the picture. Or, you could buy it now and know that you may be paying over market value.”
Our clients said that because they understood exactly what they were buying and the premium they were paying, it was an easy decision. We purchased the property for them that day. Job well done, Dean – our clients are delighted and were able to make a clear decision because they were so well informed.
Published 12 September, 2017
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.