Melbournes property markets are seeing record rates of auction clearance, and many buyers are feeling anxious at losing out on their perfect home.
Losing an auction can be emotionally taxing to inexperienced buyers, and unfortunately it is first-home buyers who are most likely to be unlucky on auction day. Cashed up investors push up prices beyond the budget of many first timers, making it difficult to buy a property at a reasonable price.
The best way to avoid missing out is to set realistic expectations and form the right property hunting mindset.
You need to understand your buying goals and that this is a property market. There are many people out there who want to buy the perfect property just as much as you. No one will sell you the property of your dreams just because you think you deserve it, or it happens to be in the prefect area and within your budget.
But don’t lose hope. If you arm yourself with knowledge and do your due diligence, you will give yourself the best chance at scoring your dream property, and the confidence to keep going when you happen to miss out.
Here are our top tips.
Reconsider your ideal property
You want a three bedroom, inner city house with a garden. Perhaps they usually sell for around $1m. But everyone wants an inner-city house so demand pushes the price to $1.2m+. You can get upset that you can’t afford it, or you can tweak your search slightly and find plenty of properties worth your interest. Consider two bedroom houses with small gardens, or a three bedder which is close to a park. Maybe you can turn an older property with renovation potential into your perfect dream home. Get creative, change your search parameters slightly, and you’ll be surprised at what you find.
Understand median price
You’ve downloaded a few property apps, and receive regular e-mails about median house prices in your desired suburb, but all the properties you find are more expensive than what your sources tell you they should be. First, you should make sure you are receiving information from reputable and verified services such as RP Data or APM. Even then, median pricing information is usually about three months old because it takes time to collect data and value properties properly. To get a more accurate median price, add the annual growth percentage of your capital city to the median price.
Second, the median price relates to all the property sold in a suburb over an entire year. This means properties sell above and below the median price, but because the value of property is increasing, you should assume that the prices will be above the median price. Also, if the median price is based on a two-bedroom house, and you are looking for a three bedroom, you should adjust your expectations to a higher price.
You’ve done your homework, and realised that you simply can’t afford to buy in your dream suburb. How do you find a good property without compromising everything you want?
- Make a list of all the things your ideal property would have. Type of housing, transport, cafes, schools, parks. Everything you want in a property.
- Look for suburbs that are 10 percent lower than your budget.
- Figure out which of the suburbs you can afford are near the original one. How many features on your list do they tick off? Consider how the suburb might change in the years to come and how it might satisfy more of your requirements.
- Go check out the suburb by going for walks, eating at the cafes and restaurants, and going to shopping centres. Being in the suburb gives you a better sense of the things that you’re looking for, and can steer you towards suburbs you might not have otherwise considered. It also allows you to identify things that could hint at future growth and development, that cannot necessarily be seen on property websites.
You may have to move a few suburbs out from where you originally wanted, but by looking at areas in this way, you’re more likely to find the next ‘hotspot’. Remember, cities are always expanding, and if you do your research and pick the right property, your short-term sacrifice will likely provide you a good payoff in 10 years time.
Be conscious about timing
If you buy properties based on trends and where everyone else is buying, you’re going to lose a lot of money very quickly. The reality is that there are plenty of buyers in the market that have more money than you, and this will make scoring the perfect property harder.
This is why timing is everything. We all wish we bought the damn property six months ago, but many factors affect our ability to buy. Perhaps you didn’t have enough for a deposit, or work was particularly busy, or you had some family matters to deal with. It’s never the perfect time to buy, but the worst thing you can do is let your fear dictate your actions. If you buy because everyone else is, then you’re going to be met with lots of competition and expensive prices. Don’t be afraid to wait — new properties come onto the market every day.
Rework your budget
If you’re missing out at auctions by only a few thousand dollars, or even up to $30,000 in certain areas, then maybe it is worth considering what sacrifices you can make to push you past those last few thousand dollars. This might mean you don’t get a holiday this year, or you trade your new car for a less expensive one. If you are serious about a property that has lots of interest, then you will have to make some short-term sacrifices to get yourself over the line.
Start with your best offer
If you’ve truly found your dream home, have done all the research and been for a walk through the suburb, then make a pre-auction offer with your entire budget. Don’t leave anything to spare. By not low-balling the real-estate agent, they will see that you are serious and are likely to consider selling to you instead of going to auction. You’ll have bought your dream house in a difficult market, and paid exactly what you would expect to pay at auction. If they reject your offer, then you know that it’s not worth going to the auction —you’ve given them your best offer. Don’t forget to tell the agent to call you if the buyer falls through. You might just get lucky.
It’s just statistics
There are a lot more losers than winners at an auction, so you cannot expect to win every time. The more you prepare and the more research you do, the better your chances are at winning. Going to lots of auctions will also give you experience and insights into things like when the best time to bid is, how to deal with aggressive bidders and how to keep a rational mindset. The more houses you find, the better your chances at scoring a great property, so don’t be disheartened if you don’t get the first one you find.
And remember, there are new properties coming onto the market every day. If you miss out today, you may just find an even better home tomorrow!