Before doing anything, have pre-approved finance in place – this should be the first task on a buyer’s to-do list, but is often one of the last to get done.
It sounds obvious, but without a formal commitment of how much you can borrow from your lender, you have nothing. In order to buy well and negotiate strongly, buyers must be able to move quickly and decisively; the war-chest needs to be open and available, otherwise you will lose out to someone who is more serious than you.
Be prepared for auctions – there’s a more than reasonable chance that the home you want to buy may be offered for sale by auction. Of all of the sales methods, this is the one that buyers cope with worst.
While most buyers understand the general rules of buying at an auction, (bids are unconditional, a secret reserve has been set, 10% deposit payable, negotiation with highest bidder if below the reserve price, etc) the vast majority are unfamiliar with the protocols, the pressure and the scrutiny that bidders face and as a result can end up freezing like rabbits in the headlights come the big day.
One solution is to attend other auctions by way of a dry-run; observe how the agents/auctioneer work the room and negotiate back and fro with bidders and vendor; see which bidding tactics work and which fail miserably; notice how the bidders with the least knowledge of the process get most easily manipulated – vow not to be one of those. Better still, get professional assistance or representation on auction day from a buyers’ advocate that knows all of the ropes.
Don’t get too close to the listing agent – we all know by now that the agent is working for the seller and not the buyer, so how come so many buyers still reveal their hearts and souls to them. Buyers must keep their cards close to their chests. If you tell an agent that it is critical that you move by a certain date or that you want to spend around $700k, but you could go up to $800k, then you are setting yourself up to paying over the odds for a home.
It might not get you on to the agent’s Christmas card list, but you must negotiate at-arms-length and recognise that the party with the most knowledge has the most power.
Think about how easily the house will resell – this is the first thing we think about when viewing homes for clients. Although you may have fallen for a home and have visions of the children frolicking happily in the garden, it’s likely, at some point in the future, that you will want to sell it. At that time this issue will be very much at the forefront of your mind.
Are there any features of the home that you or your agent will be able to hang a sales story around? Good schools, access to motorways, single-level living, sunny, easy maintenance, etc, can all positively differentiate your home from others at sale time. Better yet, are there any aspects that future buyers might fall in love with? Sea views and access to beaches are two features that can see rational thought evaporate from the minds of buyers and lead to heated competition and bumper sales prices.
Be ambitious about making capital gains – while most buyers are rightly concerned about paying too much for a home, not enough are concerned about negotiating an exceptional price and anticipating higher than average capital appreciation over time.
Residential buyers are understandably primarily motivated by practical, lifestyle and cosmetic factors. However it is also important to be dispassionate for a moment and consider the very real future benefits of buying low and selling high.
The typical buyer doesn’t consider themselves as a property investor, but they should. As one’s most significant asset, achieving substantial appreciation can enable younger buyers to move swiftly up the property ladder to bigger and better homes, as they will need to as the family unit expands. For older buyers, the difference between average and exceptional appreciation will have a direct bearing on later income levels and the funding of lifestyle options.
Don’t go it alone – many buyers need to take a reality check. Unless they are armed with industry price data, the latest research and, most importantly, a professional who is actively negotiating each day, they are operating at a distinct disadvantage to the seller who is represented by a well-equipped sales agent. This is when buyers are vulnerable and unprotected in an unfamiliar environment. Paying too much for a home in a quiet market might take years to recover from.
Professional buyers’ advocates are available on a project or ad hoc basis at any point in the buying process and provide a cost-effective second-opinion or specialist advice service which places the buyer in a stronger, more powerful negotiating position.