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Ready to make that next, or first, purchase? Don't do anything until you've read these 10 buyer mistakes and how to avoid them.
Blogger: Antony Bucello, Victorian state manager, National Property Buyers
1. Not doing your homework
It’s surprising how many people don’t do enough research – in some cases, any – when purchasing a house. If you haven’t seriously investigated all aspects of a property, you shouldn’t make an offer.
How do you know if you’re getting a good deal if you don’t investigate comparable house prices in a similar area? What amenities are nearby that may help the home increase its value over the next 5, 10, or 15 years?
Get an understanding of the sales results of similar houses in alike areas so you don’t end up in a position that sees you paying in excess of what the home is worth, now and in the future.
2. Not having another property to leverage off
It’s a very powerful bargaining chip to instil a ‘fear of loss’ into an agent. If you are making an offer to purchase a property, have a good reason for doing so. Why this property? It obviously meets all of your criteria, but so could another.
Find another property that suits your criteria in a similar price bracket (preferably a bit cheaper than the property you’re making an offer on) and let the agent know you’re interested in an alternative.
If you put all your eggs in the one basket – and the agent knows this – you’ve lost a huge amount of power in negotiation. Having another property in your back pocket helps you retain more leverage when dealing with selling agents.
3. Not submitting a legally binding offer
It is constantly surprising to see the number of buyers who believe proposing an offer to agents either verbally or in email will be enough.
If you are making an offer to an agent, submit it in writing through a contract of sale. The selling agent is then legally obliged to present this offer to the vendor. A verbal offer or casual email does nothing more than show your hand to the agent – they aren’t required to inform the vendor of your proposal.
4. Mistiming your offer
Ensure you are aware if the lapse time in your offer crosses over an open for inspection or an auction. Most contracts will state a three-day lapse period unless otherwise specified.
If you know there is an open for inspection on a Thursday afternoon at 5:00pm, stipulate your offer to lapse at 4:00pm. Put pressure on the selling agent to consider your offer over others.
5. Being dictated by emotion
This is perhaps one of the biggest mistakes made when buying a property.
If you’re buying an investment property, it is vital to look objectively at the asset to determine if it is going to fulfill its purpose and make you money. A clear cut case of calculating if the figures will stake up.
Buying your own home is considerably more difficult to divest yourself emotionally. Don’t feel pushed into making an offer that is above what you are prepared to pay. Just because an opportunity has arisen doesn’t mean you should do whatever it takes to seize it.
Buying a house is the probably the biggest financial transaction you will make. It will be with you for years and will dictate your lifestyle to a significant degree. It will be easy to be overcome by the thrill of buying your dream home, but don’t put yourself in a situation in which the joy of the purchase is replaced with the stress of paying too much.
In this situation an experienced buyer’s agent will be invaluable in offering you objective advice and guidance as to how much you should pay for a home, and whether it will be worth it in the short, medium, and long term.
6. Submitting an offer that’s too high
Judging the property’s worth can be tricky. One of the worst things you can do is propose an offer that is too high and far over what the property is worth.
If you’re making an offer prior to auction, you are effectively asking the selling agent to cancel the auction so you can purchase the property. For an agent to do this, they would have to be tempted with a good offer, so be prepared to pay a premium to get to the front of the line.
However, there is always the danger that you will pay more than is necessary to be first in and best dressed. Showing your hand like this requires a pretty cool head to tempt the agent, but not act out of desperation.
Again, this can be due to being too emotionally invested in the property. Inexperience and lack of understanding of the property is also a contributing factor. A buyer’s advocate who has an understanding of how to pique the interest of a selling agent with a compelling offer that doesn’t compromise your position is again vital in this situation.
7. Submitting an offer that’s too low
This is perhaps even worse than offering too much for a property. Not only do you waste a lot of time submitting an insufficient offer that ends up getting rejected, but you lose credibility in the eyes of the selling agent. Your offer of $610,000 on a property attracting $640,000 plus quickly falls to the back of the line. If that agent doesn’t end up getting the desired $640,000, there is probably another offer close behind they will take.
Submitting a figure that is too low will see you probably fall out of the game all together. Talking to a buyer’s advocate experienced in negotiation will help avoid this situation.
8. Not presenting an unconditional offer
Stipulating too many conditions can weaken your offer. For example, if you present an offer of $500,000 conditional to a building and pest inspection, don’t be surprised if an unconditional offer of $490,000 from another buyer seals the deal. Selling agents and vendors can be tempted to get a deal across the line if it can be closed quickly, even if they have been presented with a higher number.
9. Not getting a solicitor or conveyancer to review any documentation
It goes without saying to seek professional advice on any contract you receive before signing. Well, you would think it would go without saying. It is still surprising to see buyers signing off on a property without getting a contract reviewed by a solicitor.
If you are offered any documentation to sign, always get a professional to go over it first.
10. Not using a buyer’s agent
The biggest mistake you can make when purchasing a property is not seeking advice. Why not get someone to guide you through the process whose job it is to buy property?
This is probably the biggest transaction that you will ever make, so you want to make sure you’ve done everything as well as it can be done.