Making any of these common mistakes could cost you the dwelling of your dreams.
Blogger: Cate Bakos, director, Cate Bakos Property
Buyers seek the help of advocates for many different reasons. Some are interstate or overseas and need ‘feet on the ground’, while others don’t want to make a mistake and lean on an experienced professional to guide them. When it comes to locally based home finders though, the majority of clients who seek out our services do so because they have missed out on a property they loved. For some of them, they haven’t just missed out once; they may have missed out on five, even 10 properties. So what is it that prevents a prepared buyer from purchasing the property they so love? There are five top reasons why buyers miss out, and only two of them are reasons we are prepared to accept. Three of them are preventable and devastating when they occur.
- The first (and probably most obvious) reason is when another buyer is prepared to pay a price that is higher than what the initial buyer believes the property is worth to them. Often we have a serious ‘value’ conversation with a client about where we feel the property’s market value sits. This can be a challenging conversation though, because market value is not always the same as personal, emotional value. I recall a property I secured for a client who gave me a far higher price limit than the appraised value of the property. The challenge for them was that they had a specific wish list and needed a large land allotment in an inner-ring location where average block size was half of what they were looking for. They’d been looking for a year in a moving market (four months of which had been with me), and they were acutely aware of the effect on their budget a moving market would have if we didn’t purchase this particular property. Given it had taken a long time to identify this particular property, they didn't fancy months or even a year to find the next one. So the budget they gave me represented not only the scarcity factor, but the lost opportunity and future added cost of waiting it out. Obviously though, every buyer must have their limit and when another buyer exceeds that limit, we must be OK to let the property go.
- The second reason, which is acceptable, is when the due diligence uncovers something that either adversely affects the value of the property or the appeal which the buyer was attracted to in the first place. If a property fails a building inspection or if due diligence uncovers a five-storey complex due to be built (or in the final stages of planning) next door, or if the zoning of the property is prohibitive to obtaining the finance required – then the buyer has good reason to let the property go. It’s when buyers don’t conduct due-diligence and get caught with a property that isn’t what they thought it was that things get messy.
The next three reasons are bad reasons to miss out on a property.
- The third is being unprepared. Buyers who shop without finance in place, or underestimate the minimum contribution required are asking for heartbreak. All too often I've seen buyers miss out on a property with a ‘subject to finance’ offer in place due to someone like me coming in over the top of them with a lesser, unconditional offer because I make sure my clients are finance-approved and ready to pounce. I’ve also seen buyers miss out on the opportunity to bid because they had an insufficient deposit and didn’t bother to seek approval from the agent, the vendor and the vendor’s solicitor prior to the auction weekend. One phone call with a clear explanation can make the difference between participating and watching an auction. And proper finance pre-approval can take just two weeks (and sometimes less). There are no excuses for lack of preparation.
- The fourth is playing games with the agent or stretching the quest for a bargain just that bit too far. Buyers who ‘play possum’ by not providing their contact details to an agent after seeing an auction property they like are asking for trouble. If an agent receives an acceptable prior offer on a property and hasn’t got your contact details, they won’t call you to give you the opportunity to put in a bid. The next time you see the property, it will either be sold or under contract. The same can be said for buyers who tell the agent their offer is their final offer when it isn’t. An agent will often take you at your word. And for those buyers who could have purchased the property for an acceptable price but toyed with lower offers to be cute, only to find another buyer comes along with the acceptable offer, they will have competition from that point on and will be likely to pay significantly more than what they could have when the agent was being straight with them about the buy-it-now price at the onset.
- The fifth is less likely but can still happen. It’s when the buyer misses out because of the agent. Whether it be that the agent favoured another buyer, or a competing agent in the same office sold the property without disclosing that an offer was received and submitted, or whether agent-commission influenced the way the cards fell. As upsetting as it is (and unprofessional too), I have seen situations in the past where a buyer with a property to sell gets favourable treatment over the other buyer. Most agencies work hard at stamping out these behaviours but they can happen. One way to try to prevent such upset is to treat the agent with respect and to be decisive. Stick to your word. Submit that offer when you said you would. Call the agent back when they call you with an update. Be prepared to sign that contract and if in doubt about how your offer is being handled, ask the agent to specifically tell you where things are at. If still in doubt, talk to the owner of the agency or ask your conveyancer/solicitor to confirm that your offer has been submitted. But don’t assume all agents are playing games. Most are helpful and long-term career agents care about their reputation. The most significant reasons we see causing people to miss out are the first four. And two are preventable.