Buying safely in a hot market

January 2021 is like no other January in the world of Australian real estate, and in particular, Victorian real estate.

After thirteen long weeks of a second lockdown for our nation’s second largest city, Melburnian agents, vendors and buyers alike aren’t bothering with the typical January holiday downtime. With state border closures posing a threat to so many of us, heightened surcharges and general unavailability of local short-stay accommodation and a desire to make up for lost time, (and lost revenue for many agents), real estate has rolled on following a few days’ hiatus over the Christmas weekend.

Buyers are thicker on the ground, and buyer enquiry numbers are up on past years by a large margin. Agents are working and responsive to inspection requests.

But listing volumes are not matching the demand.

We currently have an amplified supply and demand imbalance, and buyer numbers per property are disproportionate when compared to average buying conditions.

The hallmarks of such conditions are;

• high inspection numbers
• heightened numbers of bidders/offers
• tighter days on market
• stronger resultant prices
• desperate buyer behaviour*

Buyer desperation is problematic because it causes significant issues, some of which include;

• Spiked prices: if the conditions are short-lived and stronger listing volumes follow this tight listing period, it can be assumed that January could highlight an artificial peak/surge in sale prices,
• Remorseful/regretful purchases: if buyers let FOMO grip too hard and buy irrationally, not only could they be paying too much for a property, but they could be buying the wrong property,
• Rushed purchases: missing a key issue can lead to devastating outcomes; from losing a deposit to financial losses/huge costs,
• Determination to buy a low-competition property: some buyers avoid competitive situations altogether, adopting the attitude that competitive conditions spell over-payment. Sometimes this philosophy can cost a lot more than overpaying though.

Rushing a purchase during a hot selling season is a critical mistake to avoid.

Buying safely is paramount, and if the situation doesn’t allow, we firmly believe that a buyer is better off letting an opportunity go, than risking a rushed purchase if the required due diligence can’t all be done in time.

We have a checklist of must-do actions for every shortlisted property. The list includes, (but isn’t limited to) a physical inspection, a thorough Council Planning Department check for surrounding applications/approvals, a title check, full comparable sales analysis, rental appraisal, (if applicable), a discussion with an OC manager, careful review of AGM minutes, a neighbourhood reconnaissance, contract legal review and a building and pest inspection.

If we can’t manage these tasks in time, we can’t purchase.

When buyers skimp on these steps, issues can strike. From zoning issues to restrictive covenants, obscure title types to plumbing and electrical hidden disasters, troublesome neighbours, expensive special levies not listed in AGM minutes, the list goes on and the implication of any of these could be dire.

The more benign, but equally upsetting issue is when a buyer rushes a purchase in an effort to “just get it done” and buys a property that won’t serve them well long term. A regretful purchase and re-sale costs stamp duty, agent’s fees, marketing, and lost opportunity.

Purchasing in a hot market requires fast decision making but it should never incite irrational decision making or tardy due diligence.