Buying property requires a strategic approach
Buying a home or investment property is likely to be your biggest financial decision, yet so many people are blinded by emotion when making a purchasing decision, usually resulting in paying too much, or worse, buying the wrong property. Let me explain!
In my daily work, we get approached by buyers frustrated from continually missing out on their desired property, as well as buyers not knowing how much they should pay for a particular property. There are also buyers not sure if the property of choice is the right one for them - whether that's a place to call home or an investment property to help secure their financial future.
Below are the top 5 common issues I see amongst buyers, along with my thoughts on what you can do to help increase your chance of success with your next property purchase.
Top 5 issues and what you can do about it:
1. Financial constraints
Many buyers struggle to find a property that fits within their budget. This is the most common issue that we see as usually emotions take over.
Being realistic is the best strategy here to ensure you purchase a property within your affordability and within your borrowing capacity.
When working out your absolute maximum walk-away price, ensure you stress test the loan amount you plan to borrow by adding at least 2% on top of the interest rate quoted by your mortgage broker - this way you're allowing a buffer for possible rate rises over the term of your home loan.
2. The property sells way above the quoted price range
The true value of a property is the price point where the buyer meets the seller - anything else is merely an opinion on price, which is also the case with the selling agent quoting range.
The best strategy here is for you to work out what the property is worth based on comparable properties that have sold and settled over the last three to six months. Also work out what the property is worth to you - of course this number is unique only to you based on your lifestyle and budget preferences.
When working out your absolute (best) walk away price, ask yourself... would I have paid another $500 to secure this property? If the answer is a resounding NO, then you know you've reached your limit with certainty!
3. The selling agent is creating hype saying there is strong demand for the property
Real estate agents work for vendors and will be tenacious - and at times ruthless - in their quest to secure them the highest price. Take what they say with a grain of salt and do your own research - it's the only way!
Go to the open for inspection and say very little. It's important that you have your "poker face" on and show little emotion - even if you love the property. This also applies if it's an investment property knowing that it ticks all the right boxes.
Definitely let the agent know that you're interested, and be sure to register your interest, however you should advise the agent that you're also considering other options and to please keep you posted.
If asked to make an offer prior to auction, you're best to sit back and wait for auction day as transparency at an auction is usually best - this ensures you don't get fooled into buying a property with phantom competition.
Being transparent with the selling agent about your interest is a good idea to ensure that the property is not sold from under your nose, and if it is going to sell prior to auction, that you get the chance to throw your hat in the ring.
4. Market conditions
Low stock is a very common issue for buyers - like right now - where stock levels for quality family homes are very low as buyer demand is outweighing supply. At least this is the case in Melbourne and surrounds.
The best strategy here is to build a relationship with prominent agents in your desired location and that you keep in regular contact with these prominent agents to ensure they tip you into opportunities as they arise, as well as possibly provide you access to the hidden market (i.e. off-market properties).
5. Negotiation and Competition
Buying a home or investment property is likely to be your biggest financial commitment and as such emotions run high.
Unless you work in property, there's likely to going to be a significant knowledge gap.
Choosing the right property is one thing. Knowing what the property is worth and beating your competition is another!
Due diligence is mission critical here to ensure that the property of choice doesn't end up costing you a bomb down the track with significant repairs. It's also important you do your due diligence to ensure you pay what the property is worth - or what the property is worth to you at most!
We see this all the time where competition drives buyers hard, particularly at auctions where emotions run high and the pace is fast, with keen buyers playing against sophisticated tactics to drive up the price.
If you plan to bid at auction, be sure to attend to as many auctions as you can to familiarise yourself with the process and what is likely to happen when it's your turn.
In summary...
As you can see, buying a property is more than just a few clicks on realestate.com, turning up to an open house, and signing an offer. Buying property requires a strategic approach to ensure that you not only buy the right property, but to also but it at the right price.
If you want to buy your next property lead by strategy and with ultimate success, please get in touch with us today for a no obligation discovery call to find out why we're your secret weapon when it comes to your next property move.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
