The five biggest mistakes buyers make in a seller’s market

Every.single.day we are approached with requests for help. In this challenging climate, buyers are reaching out for professional assistance to help navigate our current seller’s market. Many of these buyers could technically prepare their own brief, back-test the feasibility of their purchase strategy and go out to the open for inspections themselves, however in many cases, they’ve faced disappointment each time with their acquisition efforts.

The sad thing is that the root causes of their disappointment are the common ones.

I’ve listed and examined each one in an effort to shed light on five common root causes of buyer-disappointment.

Not moving fast enough

Two of the hallmarks of a tough, seller’s market is short ‘days on market’ and a high ‘auction clearance rate’. Focusing firstly on the first measure; when days on market are shortened, the likelihood of the property selling quickly is much higher. Buyers observe that competition is heightened and those who are motivated to buy will submit offers quickly.

It is of little surprise that private sale campaigns are currently very short. In many cases they span days, not weeks. Take the regions, for example. Properties are going under offer on the evening of their first open-for-inspection.

Buyers are often caught by surprise when they inspect a property and receive notification shortly after their inspection to advise that the property will be sold. Sometimes this notification is given by the agent when they first arrive to inspect the property.

Either way, buyers need to be prepped and ready for this so that they, too are in a position to compete for the property. From comparable sales analysis to deposit preparation to legal review, (and everything in between), buyers should approach the inspections with a willingness, (and team around them) to move fast when a suitable property is closing out.

Importantly, they shouldn’t ever assume that an auction property is immune to selling quickly. High auction clearance rates also signal tough competition, and it is not unusual for pre-auction offers to stop an auction. Agents will typically notify every interested buyer when this is the case, and the opportunity to compete will usually have a timeline of a day or so. Based on building inspector availability and solicitor/conveyancer turnaround times, this is considered an ample period of time for a buyer to finalise their due diligence.

The moral of the story is be prepared for a shortened timeframe.

Refusal to accept the market conditions, and as such, the pace of the market growth

Unfortunately many buyers lament the missed opportunity that presented prior to this crazy market run we’re experiencing nationwide. Whether it be the small window of opportunity when COVID first struck back in March 2020, or the pre-election slowdown our capital cities were plagued by, plenty of buyers look back at historical sales over this time and continue to search for bargains of that nature.

Recognising that those market conditions are no longer enabling those bargain buys is really critical to moving forward. Too many people spend months searching for similarly priced properties after the optimal buying conditions have passed, only to waste months of search-time in a market that is soaring.

Our recent growth data exhibits a rolling average of 16.2% for Melbourne. As the miserable months of our 2020 COVID lockdown drop off the rolling average period, our imminent rolling average is more likely to sit at 20%.

This figure is almost 2% per month.

At this level, and based on a million dollar budget, a buyer can reasonably calculate that their budget should allow for $10,000 per fortnight in market movement costs.

Searching for a needle in a haystack can be a very costly exercise.

Applying a conservative budget at the beginning

The number of times we’ve worked with buyers up to a firm budget, only to have them increase it months afterwards is too numerous to count.

We don’t ever encourage buyers to stretch beyond their means, but if stretching beyond a preferred price tag is something that that they are prepared to do from the outset, they should put that chat on the discussion table early.

It’s disappointing to see someone purchase what they could have afforded for a lower price had they circled in on the stretch budget months earlier.

Not being crystal-clear with the agents about having interest in a property

Playing possum with the agents in a seller’s market can be a big mistake. Many auction campaigns are cut short when aggressive buyers make firm, pre-auction offers. If a buyer has either played down their level of interest, or not advised the agent at all that they have interest in the property, they face the possibility of the property selling without any notice.

The same can be said for telling agents that an offer is a ‘final offer’ when it’s not. In a competitive, private sale situation, an agent will execute a contract with a successful buyer if other buyers have expressed that their (lower) offers are their final offers.

Buyers often ask us if an agent is bluffing about other buyers.

In a seller’s market, it’s less likely that it’s a bluff.

Targeting lower-hanging fruit in an effort to avoid either competition and/or auction

So many buyers loathe auctions. For some, it can be all about the unconditional nature of it and the cost of numerous building inspections, but for many, it boils down to fear of disappointment after having seen so many auction results fly past the agent’s quoted range. Invariably, this latter point is linked to a lack of pricing research. Buyers who conduct recent comparable sales analyses will have a much sharper idea of price than a buyer who blindly follows the agent’s quote range.

One of the worst ideas a buyer can adopt in a seller’s market is to avoid competitive situations. If we really think about it; targeting a compromised property that nobody else wants in an effort to avoid competition makes little sense.

The only time that we support this type of approach is when the property is not compromised.

The proliferation of off-market opportunities is a marketing tactic for many an advocate and selling agent. Some off-markets are good, but plenty are compromised. Whether it be overpriced, badly located, lacking appropriate permits, or hampered by an invisible issue that a lender won’t easily accept, buyers need to be very cautious about off-market ‘opportunities’.

If it seems too good to be true, often it is.

And if a property is floating around on the search engine for months, they must establish what the reason is. In a seller’s market, it is far more likely that there is a reason.