How to bag a bargain at auction this spring property season
Although the weather’s not quite hot enough to give your budgie smugglers another run, there is one thing that’s heating up, and that’s spring property season. After a lengthy housing boom, first home buyers could be in the prime position to purchase as the property market loosens its grip.
Property prices have been sky high for a long time now, and buyers in the Sydney and Melbourne markets are welcoming the relief of sizeable price corrections in the last six months. But Mozo Property Expert Steve Jovcevski is expecting another 5% to 6% price drop by December this year, at which point he said the market will likely be at its bottom.
“This is likely to be as good a time as ever to invest in Sydney and Melbourne, with growth predicted to accelerate again over the long term,” he said.
Prices in these markets are dropping due to a combination of low clearance rates, increases in available housing and lenders instituting tougher lending criteria. For the first time in years, first home buyers may have the upper hand against property investors, who Jovcevski said are less likely to add to their portfolio due to undesirable conditions this year.
Spring is traditionally a booming time for property sales, and this year looks to be no different, except buyers might need a new strategy come auction time to keep up with recent changes in the market.
“It’s safe to say we are seeing a vastly different property market compared to this time last year, so if you’re looking to buy this spring property season, a different strategy is needed,” Jovcevski said.
“The good news is if you do play it smart at auction and at the negotiating table, there’s opportunity to knock tens of thousands of dollars off the selling price.”
In a shifting market, you’ll need a different strategy when it comes to buying, so here are Jovcevski’s top tips for first home buyers buying at auction, so you can snag a bargain this property season:
Be the top bidder. As the market is changing and less properties are reaching the reserve price at auction, being the top bidder can put you in a good position come negotiation time.
“Coming in as the top bidder will give you the first bite of the cherry when it comes to negotiating with the agent for the purchase of the property,” said Jovcevski.
Play the waiting game. Properties that pass at auction tend to get snatched up within seven days, so it’s prime time for you to negotiate a lower offer than the price guide, Jovcevski said.
“When other prospective buyers are scratching their heads wondering why this property isn’t selling, this is the opportune time for the savvy buyer to go in with a lower offer than the price guide.”
Get pre-approval. Having pre-approval is essential when heading to auctions, but what you might not know is that it can give you an extra leg up if the agent knows about it, too.
“If you waive your right to a cooling off period which is usually five days for finance approval and the agent knows you won’t pull out due to finance they might accept a lower price secure in the knowledge the property is sold,” said Jovcevski.
Find out what the reserve is. When it comes to negotiating a price, knowledge is power, and finding out what the reserve price is will help you anchor your starting offer.
“Don’t start the negotiations by trying to blow away any competitive buyers with an enormous offer as there may not be any. Instead, try and negotiate a price below the reserve, justifying your offer by pointing out the negatives associated with the property,” said Jovcevski.
Don’t let yourself be bullied. When negotiating, Jovcevski suggests telling the property agent that you’ll be moving on to the next property if you don’t get a prompt answer. But on the flipside, don’t let the agent push you into closing a deal if you’re not comfortable with the price either, as knowing the market of the area you want to buy in will help you decide how much you’re willing to pay.
Prepare for market inconsistencies. Finally, Jovcevski said that in the current inconsistent market you could find two houses in the same area that could have completely different levels of interest, so it helps to know your area well and go to several auctions.
“There is not enough finance approved buyers to go around. Make the effort to go to both the auctions on the day and potentially pay 5-10% less than a similar house sold down the road on the same day,” said Jovcevski.
Once you’ve armed yourself with as much bargaining power as possible, you’re ready to get out there and start searching for your first home. Before that, you’ll need to find a competitive home loan deal to finance your purchase, so head over to Mozo’s home loan comparison hub to compare great rates and deals.