It’s really tough when you are trying to buy a property in a rising market. Just when you feel that you have come to grips with sale prices, another one sells that has you scratching your head. This is what happened to Garry and Anna. They started looking when the market was already strong, and then it surged!
The Sydney property market moved suddenly in 2013 and agents and buyers alike got taken by surprise. When an agent lists a property, he/she quotes a price based on recent comparable sales and when the market suddenly spikes they find that competition can push prices way in excess of their initial expectations. It takes a while for their price guides to catch up and reflect actual sale prices. So, after a few months, you see the gap narrowing between advertised and actual prices.
That said, agents never like to quote exactly what they think the property should sell for. There is a delicate dance that goes on. Buyers expect agents to quote low. So if an agent goes against the grain and quotes accurately, buyers will assume that the vendor wants too much for the property. As a consequence they don’t compete. From a buyer’s perspective, this is a perfect storm! This could be an opportunity to pick up a property for a reasonable price in a hot market.
So how do you avoid chasing the runaway train?
- You have to be diligent in looking every weekend at property and if a house has it’s first open midweek, you need to be there.
- You have to quickly react to moving prices, recognize that the market is on the move and be prepared to pay a premium for a quality property.
- But remain cool headed – don’t panic and pay too much for anything sub standard – you need to pick and choose the properties to pay a premium for.
In a hot market not all properties are created equal. Some will end up being fair value and others overpriced. For example, we showed Garry & Anna a property that needed work and we also showed them one that had been completely renovated. If that first property sold for early-mid $800s (as the agent was indicating) and the last one sold for high $800s-$900K, that shows the craziness of the market. The first property was not well maintained, the floorplan was all wrong and I don’t think the street was as good as the last. To make the necessary changes Garry and Anna would need to invest a whole lot more than $50K. Forget the time and hassle!
The key is to be prepared: ready to buy, know what you are prepared to compromise on and armed with recent market intelligence. Because when you find the right property you will need to pounce and be decisive.
The steps you need to take to be prepared are:
Have your pre approval ready and talk to your bank or broker about what needs to happen to make that an unconditional approval (usually a bank valuation).
Have your deposit ready (a cheque book is ideal).
Have a building/pest inspector or strata report people on short dial.
Get the contract to a solicitor or conveyancer for review.
Check things like neighboring DA applications, general noise levels, natural light at different times of the day.
Be constantly up to date with recent sales information and try to inspect as many other competing or comparable properties as possible.
When you find the right home in a hot market, you do not have time to think. You need to know what you want, know when you have found it and know what to pay for it. All that without panicking!