Costly mistakes to avoid when buying

Having the right strategy in place for making price offers has become critical in the current market given the frenzy of buyer competition and fewer properties being listed for sale.

With CoreLogic research showing national dwelling prices grew in March at the fastest rate in 32 years, the current market means buyers have to be organised, have their finances approved and be ready to pounce on sales or risk missing out.

Experts revealed record demand and rising vendor expectations may have limited buyers’ power to get discounts but there are some key steps they can take to avoid overpaying, whether it’s a private treaty sale or auction:

HOW TO MAKE PRICE OFFERS FOR PRIVATE SALES

Private treaty listings are selling significantly faster than what they once did. Buyer’s agents said this means a buyer has to be ready to potentially make an offer as soon as the first open home. They also advised avoiding “low ball” offers on price in this market as it will send the buyer to the back of the queue.

Real Estate Buyers Agents Association president and buyer’s advocate Cate Bakos said price guides should not be taken at face value. She encouraged buyers to find comparable sales of similar homes in the area from the past six weeks to judge what a home could be worth.

“You might need to add two or three per cent on top of those prices to factor the price growth we are seeing,” she said.

Ms Bakos added that one option buyers could take to stand out from the pack, if serious about buying, was to make an unconditional offer with a deposit and signed contract. “This shows you are prepared to go ahead with the purchase and unlike the other parties, it will make it a serious offer to the seller and agent,” she said. The catch with making an unconditional offer is that you need to be confident in what you’re buying and have done all the necessary due diligence on the purchase to ensure it is a savvy investment.

BEST STRATEGIES FOR BIDDING AT AUCTION

Buyers should go into auctions with a clear plan on how they will bid and a budget set in concrete, Mr Bakos said, adding that making the opening bid was often an advantage. “Professional bidders like myself always go first, as this intimidates the competition and can scare them off,” she said.

A buyer’s opening bid should be conservative and never the maximum they are prepared to spend. Somewhere around the lower end of a price guide is a good starting point.

“Making your best offer first can often leave you wondering if you overpaid if the home then gets called on the market,” she said.

Buyers should also have their budget written down and with them. It should be based on what comparable sales indicate to be the value of the property. “If you spend over that limit you could get a better property like one with a pool or an extra bedroom,” Ms Bakos said.

Propertybuyer CEO and buyers agent Rich Harvey said bidding over budget was a slippery slope. “You are bidding emotionally and likely to keep upping your bid,” he said.

Mr Harvey added buyers should also avoid making huge bids such as taking the auction from $2 million to $2.6 million in a single bid.

“Not only could you be left stuck paying hundreds of thousands of dollars more, but you need to slow the bidding down and increase the pressure,” he said.

BUYING AFTER THE AUCTION

If a home fails to reach the reserve price it will be passed in and post auction negotiations then usually start with the highest bidder.

When this happens, buyers should always assume they aren’t the only ones interested in the house and the chips are in their favour during the negotiation. Mr Harvey said a buyer should position themselves to be the highest bidder at auction to have first crack. A worried agent or auction stopping to seek vendor instruction were telltale signs a home could be passed in. “That is your time to pounce and get in front of the competition with a bid,” Mr Harvey said.

The current market meant buyers were encouraged to put forward a serious offer that was about close to the upper end of their budget. Strong demand for homes meant a low offer after the auction could see the buyer thrown out of the negotiations and the agent move onto another bidder waiting outside.