The property market in Christchurch and Auckland is frantic at present and this is putting a lot of pressure on first home buyers due to the competition they face when searching for a home.
Having some knowledge of the common behaviours of real estate agents will help you to cope with this pressure and keep the ball in your court.
The agent will ask you why you are looking for a house. There are advantages and disadvantages in telling them that you’re a first home buyer. One advantage is that if they tell this to the vendor (seller), some vendors are more inclined to accept your offer – over that of an investor. The big disadvantage is that the agent will know that you are an emotional purchaser and are likely to be a bit unsure when it comes to real estate. The best thing you can do is to become as knowledgeable as possible and then let the real estate agent think that you’re a complete novice. Make this work to your advantage!
Don’t tell the agent too much. They don’t need to know about your situation. On the other hand, you want to find out as much information as you can about the vendor and the house. Find out why the property is for sale and see if you can determine how motivated the vendor is to sell. If it’s a divorce or deceased estate they’ll most likely just want a quick and simple sale of the property. They won’t necessarily want to hang on for a long time to get the best possible price.
Ask the agent “is there anything about this property that you need to tell me?”. By law, if the agent knows of something that may influence a prudent purchaser’s decision (any defect for example), they have to divulge this if you ask them. Some will volunteer this information, but many do need to be prompted.
Know that the real estate agent is not your friend. They will be all smiley and appear to take an interest in you, but really they want to sell the house as quickly as possible so they can get their commission. The agent theoretically works for the vendor so should do what is best for the vendor. The commission earned though is what is putting the food on the real estate agent’s table. Really they just want to sell the house as quickly as possible to get their commission. They work for themselves, more than for anyone else.
Take everything the real estate agent says with a grain of salt. They will spout off all sorts of stuff about the price achieved for other houses in the area; how much interest there has been in this particular property; and even lie about how long it takes to drive from the property to the CBD, for example. I have experienced this first hand. The agent assumes that they know more about the property than you do. These days this needn’t be the case. In fact, you have a lot of resources available to you on the internet such as getting a QV report (many banks and mortgage brokers can give you these for free) to find out what other places have actually sold for. The report also shows what the current owner paid for the house. This can be a useful indication as to what they might expect to sell it for. It’s most helpful in a stagnant or falling market because you know that the vendor will want to get at least close to what they paid for the house. The vendor is likely to have debt proportional to that amount and the bank will need to release the mortgage security at settlement.
Don’t necessarily believe the real estate agent when they tell you there are other interested buyers. In the current market, there probably are, but hubby and I have experienced this and it’s been a lie to get us to act quickly. Threaten to walk away when told this. Say that you are not interested in a multi-offer situation and have other properties that are just as good to consider. See what reaction this gets you from the agent. We have had agents quickly attempt to back out of their statement so that we wouldn’t walk away. There is also the chance that they do have other interest and just want to use you as “the other interested party” against someone else.
Playing buyers off against each other is a favourite pastime of the real estate agent. We have had a multi-offer situation turn into a phone auction. We were not interested in bumping up the price for the other buyers. The house was not that exceptional, so we let it go, rather than paying too much or causing the other buyer to pay too much. Know your price before you make your offer. Set it and be prepared to walk away. Tape it to the telephone so you can see it when the agent rings and asks you to increase your offer!
As a first home buyer, don’t be pressured to act quickly because there is potentially some other interest. For the first few properties you look at, you will need to examine them thoroughly. Once you’ve looked at plenty (at least over 30 properties), you will get more proficient at spotting the potential, (and the potentially disastrous!) for each property. You need to do quite a bit of homework before you’ll be in the position to act quickly.
The most important thing before you make any offer is to be sure of a realistic value for the property. You can put clauses in for the other stuff (e.g. building report, LIM, Certificate of Title, finance etc.), but you can’t change the price! Make sure you are getting reasonable value when you put in that offer. As long as you are sure of your budget, you will have time during the “conditional phase” of your contract to check everything else. If you are unhappy with the building report, or can’t get finance you can get out of the contract as long as you have included those clauses in your offer.
The aim is to be the first (and only) person negotiating with the vendor! Don’t let the real estate agent fob you off on presenting your offer. The agent works for the vendor and the vendor expects to see offers. They want to sell their house, or it wouldn’t be for sale. By not presenting your offer in a reasonable time-frame, the agent is not performing his/her role in the best interests of the vendor. Agents will try to make their lives easier by holding onto offers so they can gather up a few of them at once and make one visit to the vendor. The vendor has a right to see your offer shortly after you have written it. If the agent is hanging on to your offer until it becomes a multi-offer situation, you can ring the owner of the office the agent works for. This worked for us. Our offer was presented and accepted about an hour later when the agent wanted to hold it until the next day! It is up to the vendor whether they take the first offer, or wait for others. The vendor needs to see the offer to be able to make that choice.
It’s tough out there at present, but stay positive, learn to act quickly and boldly. If you miss out on a property, there will be a better one around the corner. This has always been true in our experience.