The Embarrassed Buyer Syndrome: Causing a Real Estate Buyers Market

Have you ever been in a designer store and really wanted to ask for the price of an item of clothing but were too shy? I have. And it’s all because if it turns out to be too expensive, I don’t want to let on that I might not be able to afford it. It’s embarrassing. I have a theory that this same emotion is creating a real estate buyers market in Sydney.

The Sydney property market is currently experiencing a slowdown, which is well documented in the media. Real estate agents are scratching their heads wondering why buyers are backing out of auctions at the eleventh hour. We have been hearing this same refrain from many agents recently and I think a big part of the cause is the embarrassed buyer syndrome. (Don’t google this, I just invented the term.) Put simply, there are buyers looking at the moment who can’t get finance and won’t let on.

There are many elements that go towards creating a real estate buyers market. Fundamentally, anything that causes an increase in supply and/or a decrease in demand will have an impact on the property market. These factors include interest rate rises, “jawboning” press stories, negative BBQ talk, auction law changes, regulatory changes, taxation changes…

The restrictions that APRA has put on the banks in recent times has had an obvious and intended impact on investment lending. What is not so obvious is the effect on owner occupier borrowing. All loan applications are facing increased scrutiny by lenders. Unsuspecting buyers and inexperienced brokers are getting caught out.

Many people assume that it is only investors who are finding it difficult to get finance at the moment. Incredibly, there are a lot of house hunters who think they are financed but actually aren’t. When they find a property they are keen on, almost as an afterthought, they remember to check in with their broker in the last days before the auction. Here’s where they get a shock – the rules have changed and they need to provide a whole lot more documentation before they can be certain of approval. For many buyers, they also learn that their borrowing power has shrunk. No wonder we are experiencing a real estate buyers market in Sydney at the moment.

When a real estate agent says to me (as so many have of late); “I’ve lost 3 buyers in the last two days and I can’t understand why”, I am pretty confident that they have fallen victim to the embarrassed buyer syndrome. Because, let’s face it, very few buyers are going to admit to the agent: “I thought I could afford it but just found out I can’t.”

Have you heard of the “embarrassed buyer syndrome”? Could be the cause of a real estate slowdown. Click To Tweet

What this means is that cash buyers, or those with a complete approval are actually in a position of power at the moment. But most don’t even realise because they are not actively looking. Instead, they are “waiting to see what happens”, which is typical in a real estate buyers market. We encourage our clients to take advantage of these conditions. I believe that this is a relatively small window of opportunity. Once buyers, brokers and agents understand that the lead time for pre-approval is now longer, they’ll get their act together.

Currently many buyers are shopping with an empty wallet, they just don’t know its empty till they go to open it and see there’s no cash in there. To avoid the embarrassment of that happening again, they’ll go to the ATM first. When enough people get the message, competition will return and prices will stabilise and/or climb. That will be the end of the real estate buyers market in Sydney. So if you want to buy a home, get your finance approval in place and go shopping before everybody else works out what’s really going on.

Call us now on (02) 9555 5206 for a free 20 minute consultation if you’d like to find out how to take advantage of the embarrassed buyer syndrome.

Further reading: 

Is The Sydney Property Market Slowing? 5 Signs To Look For…

How a good mortgage broker can save you more than money

Is now the best time of year to buy a house in Sydney?

Published 22 November, 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.

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