4 types of property buyers who benefit most from a buyers market

There are 4 types of buyers who can benefit most from a buyers market, but there are also some common mistakes each of them must avoid making.

1. Upgraders
The gap between what they sell and what they buy shrinks in a buyers market. This is a good thing!

The opportunity you have been waiting for!
First mistake
– waiting to see what’s going to happen in the market instead of grabbing the opportunity.
What they are really saying is that they’ll wait until prices rise again before they do anything, which means the window has closed.

Lower Transaction Cost!
Second mistake
– fixating on the sale price of their own home. 
Instead, focus on the big picture – the total transaction cost of the sell/buy/move. Of course, this is hard to do because we get emotional about our homes.

Greater Bargaining Power!
Third mistake – failing to negotiate the best deal. They are dealing with a professional negotiator ie. the agent who doesn’t have the same emotional attachment to buying a home and, more often than not, the buyer is outgunned.

2. First home buyers
First home buyers can really take advantage of falling prices and less competition from investors in a buyers market.

First Home Buyer Incentives
First mistake
– relying on incentives! In this v
ery competitive micro-segment of the market, often you get a lot of extra value if you can push yourself even another $10-20K. Forget the incentives and focus on what you want to buy, where and how much you need.

Shiny & New
Second mistake – buying brand new. The 
RISK – you pay too much, lose money, builder goes broke, often special levies are raised to pay for defects. Existing property with potential to add value will serve you better in the long run.

Bank of Mum & Dad
Third mistake – getting advice from your parents. Well meaning parents like to be the font of all knowledge for their kids but often they are not that experienced themselves. Also, they often help their kids pay too much. Be very aware of the limitations of relying on your parents for advice.

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3. Home owners with no investment properties
If you bought a property in Sydney more than 5 years ago, you could be sitting on a good chunk of equity. Depending on your income and other liabilities, you might be able to access this to buy an investment property to help you build your wealth and establish long term financial freedom. The paradox is that risk averse people tend to pay down their debt and avoid borrowing to invest BUT they are in the box seat at the moment. However, luck happens when opportunity meets preparation.

First mistake – not even looking for opportunities in a buyers market.

Second mistake – thinking the risk is in the borrowing and not the asset. Not all investment properties are good investments. In fact, it’s easier to lose money than make it in property (including opportunity cost) and it’s important to understand where the risk actually lies. Risk averse people often borrow a small amount of money and buy a low quality asset instead of focusing on doing their numbers around a low risk asset, which might require them to borrow more money.

Good advice is valuable!
Third mistake
– getting advice from the wrong people. Friends and family are not great sources of advice. Usually, there are 5 advisors needed to fully understand your options – but only one can advise you on the actual property. The Buyers Agent, of course. The other advisors you’ll need are: Accountant – Mortgage Broker – Financial Planner – Lawyer.

4. Cashed Up Buyers
Individuals that are cashed up are buyers who have sold and haven’t yet bought! So, what are you waiting for? This type of buyer has a lot of power in a buyers market, however, you only get one shot at buying the right property. Make sure you choose a high performer, in the right location at the RIGHT price!

Further reading:

7 mistakes property buyers make that cost them in a buyers market

How to choose a good buyers agent: 11 questions to ask

Published: 30 October, 2018

DISCLAIMER: Good Deeds blogs/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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