With clearance rates in the low 50’s, stock levels climbing and every media outlet screaming their banner headlines “It’s a Buyers’ Market”, it must mean that every buyer will be able to walk in and buy whatever property they want and get a bargain. This is simply not true! The only way this would be accurate is if every Selling Agent in Melbourne had less than 12 months experience as a selling agent.
Some raw recruits may find the going very tough at the moment but for seasoned campaigners, this is just another part of the property cycle that we are all used to. Being a buying agent for the last decade, I can tell you this is a market in which we can purchase good property at very fair and reasonable prices. But it also means a lot more research needs to be done than any other part of the property cycle.
You must have a much better idea of what the property is likely to sell for under competition. When 10 properties a week are being auctioned in the same suburb and all selling any member of the public can read the auction results and get an idea of what is happening in the market. But when the results become difficult to find, and many are not available to the public as they become private sales which cannot be disclosed to the public under Victorian State Law, negotiation becomes more difficult.
You have found your dream home and you have decided to put in an offer. As there are fewer advertised prices now, you ask the agent how much the vendor wants. The experienced agent knows the market and whilst he may know the vendor will take $820,000 he tells you they want something well in excess of $800,000. The unreported comparable sales in the area that you did not know about, show that similar properties have recently sold in the high $700’s.
As you know the market is tilted in your favour, you offer $800k and the agent says the vendor will accept $850k. You counter with a little more, the agent relents a little and you end up just above or just below $820,000. You have managed to barter down $30,000 and only moved $20,000 to do this. Well Done??
Unfortunately the property is only worth $780,000 and unfortunately you have overpaid around 5%. For the long term owner occupier, this is not really too bad, but for the investor, you have just lost the first 6 -12 months capital growth.
The above scenario is almost identical at an auction that passes in: except you are under a massive increase in pressure. This will be seized upon by experienced sales agents. The time frame of an auction pass-in seems to concentrate both the vendors and the would-be purchasers’ nervous energy. Most times the purchaser will be looking to buy well under value and the vendor will be under enormous pressure to get a satisfactory result. Make sure you are not alone when negotiating in this pressure cooker situation. You should have a trusted friend there to keep you in touch. The selling agent is not there to assist you, he is being paid by the vendor.
In short, the key to good negotiation is not what the media is dictating about the market, but good planning and research. Just because an agent gives you a “discount” on the asking price, that does not make it a BARGAIN.
Ian James
Director JPP Buyer Advocates