Common mistakes by real estate buyers.

Many of our clients come to us after a string of disastrous attempts to navigate the property market themselves. Here are some examples of common mistakes that we come across.

• Giving the selling agent too much information. Putting you at a disadvantage when negotiating.
• Not giving the selling agent enough information. How many people have missed out on a property because the agent did not know they were interested? The art is in knowing what to say and when.
• Panic in a rising market and buy foolishly. As Louis Christopher said last week, “Remember lemons are very hard to sell in bad markets." But we see plenty of them selling at the moment.
• Panic in a rising market and don’t buy at all. Of course the market will level off at some stage, but how much will prices rise before that happens?
• Keep increasing their offer without a counter-offer from the vendor. This is not the way to negotiate with an unrealistic vendor.
• Leave too much time between getting an offer accepted and being ready to exchange contracts. And leaving the door open for another buyer to snap it up.
• Allow the auctioneer to create a rhythm. Before you know it you have bid over your limit.
• Let the fact that other people are bidding confirm what the property is “worth”. Instead of doing your own research.
• Believe what the agent is quoting for a property. Buyers largely determine what property sells for in this market and there aren’t many that tell the agent what they are prepared to spend.

There are many pitfalls for the unwary and the weary. And it is so easy to get caught up in the general frenzy and lose sight of what represents value for you.

For more information on buying property in Sydney go to www.gooddeeds.com.au.

Why we recommend property investors engage a managing agent.

I could manage my own investment properties but choose not to. The reason is that tenants have a whole bunch of rights and landlords have a whole bunch of obligations that most are probably not even aware of. So, a good property manager can help keep you out of tribunal (or represent you if necessary) and ensure that your interests are protected at the same time. It’s not just money for jam…

Also, even though I have often lined up my own tenants, I always pass the management onto an agent so that I can keep at arms length. I am busy working in my own area of expertise and don’t want to be bogged down with tenant issues (sometimes there can be plenty).

And talk to your accountant, as management fees should be tax deductable. You can also get all the bills directed to the agent and get one annual statement which you just pass onto your accountant. Simple!

For more information on buying an investment property in Sydney go to www.gooddeeds.com.au.

Who uses a buyer’s agent?

Many people think that it is only the rich who engage the services of a buyers’ agent.

Our client statistics show that the reality is vastly different to what you may think.
• 74% have a budget under $1 million.
• 71% are owner occupiers.
• 81% live in Sydney.

The reasons people may choose to use a buyers’ agent include:
• Being time poor
• Recognizing a knowledge deficit
• Appreciation of the benefits of “buying” experience
• Comfortable with outsourcing specialist expertise
• Desire to avoid making a costly mistake
• Need reassurance and confidence to commit to such a monumental investment

Let me ask you this question – if you were to buy $20,000 in shares, would you do so without specialist advice? Your exposure to risk with property is much greater and the asset is not very liquid, to say nothing of the costs of getting in and out of the market. In short, everybody can benefit from using a buyers’ agent.

For more information on buying property in Sydney go to www.gooddeeds.com.au.

Why out-of-towners need expert real estate help.

Here is a little story about buyers from Brisbane and buyers from Melbourne trying to secure property in Sydney’s heady real estate market.

Just before Christmas last year we had a client come to us after finding a property they liked in Rozelle. These buyers had recently moved to Sydney from Brisbane and, although renting in the area, had yet to come up to speed with the local dynamics of this market.

This particular property had ample internal accommodation, double parking and city views, so it was easy to see why it appealed to our clients. HOWEVER, it was on a busy corner, lacked privacy, had limited usable outdoor space and was neither contemporary nor period in style. In short, this was a property that would be difficult to sell in a “normal” property market, particularly as it was of a style that generally does not appeal to Balmain/Rozelle locals.

After evaluating the property, we advised our client that $1.7M was “top dollar”. It had, in fact, just passed in at auction with a vendor bid at that very figure (and two other offers had apparently been made under that figure), however the vendors were hoping to achieve $1.8M. The agent reported to me that the vendors would accept $1.785M and I expect there would have been further room for negotiation if our clients were prepared to pay over $1.7M, however my clients decided to let the property go.

Christmas came and went, then suddenly we hear that the property had sold for $1.8M! A little investigation revealed that the purchasers had a very similar profile to my clients: they were of a similar age, recently moved from Melbourne and also renting in the area. The difference? Our clients had expert advice and avoided paying too much for a property that does not appeal to local buyers. If the Melbourne people had engaged us, they would have saved a minimum $15K – and probably more.

Postscript – our Brisbane people have since purchased a lovely double-fronted weatherboard in Rozelle at a much fairer price! Precisely the sort of property that will be easy for them to sell to a Balmain/Rozelle local when it comes their turn to put it on the market.

For more information on buying property in Sydney go to www.gooddeeds.com.au.

When are prices going to drop?

It seems now that most economists agree that the sellers’ market is here to stay for a while – but why and for how long? This week I went to a property briefing presented by Westpac and gained a greater understanding of the economics of real estate.

One key underlying factor in residential property in Australia is consumer confidence. In a consumer sentiment survey conducted by Westpac in January, 80% of respondents said that they thought house prices would rise this year. Bottom line, if you think house prices are going to rise you won’t feel nervous about buying now, but you will feel nervous about prices going up while you take your time hunting for the perfect home.

Why are consumers so confident? Our trusty Westpac economist pointed out the following market drivers:
• Population growth (migrants and babies are on the increase),
• Under-supply of dwellings (housing approvals have been lower than needed to support this population growth since 2004),
• Affordability (according to economic measures, affordability is not an issue in Australia – despite how you feel every month when you make your mortgage payment!),
• Our current stimulatory environment and the Reserve Bank’s reaction to local and international economic forces (the plan is apparently to remove the stimuli - such as emergency interest rate levels – gradually so as not to impact on consumer confidence).

In short, it looks like we are going to see continued property price growth throughout 2010 – at least until we consumers start lacking in confidence…

For more information on the Sydney propertyt market, go to www.gooddeeds.com.au.

How to decide how much to pay for a property.

As real estate agents, we have a requirement under the Property Stock & Station Agents Act to undertake a thorough analysis when determining what purchase price we recommend a client pays.

There are a lengthy list of factors we take into consideration in order to comply with the Act. Some of which are:
• A detailed analysis of recent sales
• Assessment of the factors that may affect the price people are willing to pay for this property in the current market.
• Is it a property that will attract buyer interest if you need to sell it in a flat market?
• Is there an obvious way that you can add value?

However, there are also factors that are individual to every buyer. For instance:
• How long have you been looking for? Is this the only property that you have found in 12 months that suits your requirements?
• What is your timeframe – own it for 5 years then upgrade, or is this your 20 year home?
• Are you an investor or an owner occupier?

Sometimes you need to pay a premium for a property that is going to suit your needs better than anything else that is likely to come onto the market in the near future.

Sometimes, however, it is folly to pay a premium for a property that is highly likely to drop in value when the market levels off. Knowledge is power and the more you know about the suburb you are buying in, the better decision you will make.

For more information on buying property in Sydney go to www.gooddeeds.com.au

To buy or not to buy, that is the question.

So, the market is positively boiling and you don’t want to overpay for a property that is going to drop in value once official interest rates hit 7.5% or 8%? So, you decide to sit on your hands and wait until the market drops.

Right strategy? Or costly mistake?

The answer is, like everything in property, not straightforward.

Firstly, the decision to wait really hangs on the timing of the next market slow down. We all know it will happen, but when? Many economists are suggesting that we will experience strong growth for the rest of 2010. If this is the case, then there is no point waiting for prices to gain another 10%+ before easing off a little – get in the market now and enjoy some capital growth!

Or, if the Reserve Bank does decide to rapidly increase interest rates sooner rather than later (though some macro environmental forces seem to be keeping the brakes on its plan to return rates to “normal” levels) , those who buy now may find that they have bought at the peak.

An essential component to this decision making process has to be your time frame. If you are looking to buy a property and renovate for a quick turn-around, then riding the property cycle is extremely risky – but get it right and it could be very profitable. If you are buying an investment for the long term, then as long as you are careful that you buy a quality property and do not get caught up in the current buying frenzy, you should be able to ride out future peaks and troughs in both the sales and the rental markets (assuming of course that you have not borrowed up to the hilt).

Lastly, if you are buying your “20 year home” you might find that suitable properties are few and far between. Your decision whether or not to buy really depends on when you find the right property. If that is now, then pull out all stops and go for it – depending on what you are looking for and where, another may not come up for another 6 or 12 months!

For more information on buying property in Sydney go to www.gooddeeds.com.au.