The most common feedback shared with me by buyers in Auckland over the past 12 months has been how challenging it has been to secure a home.
Supply has been restricted, demand for housing has been increasing, prices have surged, and, in many cases, banks are understaffed and have been ‘frustrating’ to deal with.
So, with all of these challenges facing buyers, what is the formula to being a successful buyer? Please read on to learn my top 7 tips for buying in a hot seller’s market.
It is not uncommon for me to meet buyers at open homes who don’t even have a pre-approval for their finance. In a hot market, there is no time to arrange a mortgage approval. A high percentage of homes being offered for sale in a hot market will be sold via auction.
You need to be in a position to bid unconditionally if you see something you like. If you find the right house (whether auction or non-auction), you need to be ready to pounce.
Closely linked to my first tip, this advice could be the topic of a separate blog all by itself. A huge question for anyone looking to purchase (if they already own a home) is whether to buy first or sell first. This tip is only relevant to buyers who would need to sell their current home to purchase their next.
In a hot market, my recommendation is clearly to sell first.
Why? As I previously mentioned, many vendors will decide to go to an auction to sell their home in a hot market. If you are a conditional buyer, you don’t have access to a large percentage of the houses being offered for sale (unless you are willing to bridge finance). Even if you are targeting a non-auction property, you will be in a much stronger negotiating position if you do not have to include the sale of a home as a condition of your offer to purchase. This is especially important if you end up in a multi-offer situation, as your competitors will have the edge on you if they are ‘cash buyers’.
This strategy has the obvious downside of potentially ending up without a house temporarily. There is a 'Plan B' needed for a roof over your head if this eventuates.
Time is of the essence in a hot market, so there is no point in wasting it considering homes that are unlikely to be within your budget range.
Suppose you have tried to secure a particular type of property in a specific suburb several times and keep missing out. In that case, there is a high likelihood that you are going to continue to miss out! Buying the cute character bungalow with a backyard in Western Springs might be what you dream about - however, it may be that a newer duplex home in Onehunga is a more realistic next step on the property ladder.
In addition, there are new expansion areas right across Auckland. Consider casting your net a little wider for now, then work your way back to your preferred location over the next 5-10 years.
There are unlikely to be bargains out there, so be prepared to pay a premium price. As much as we all love to find a great buy that no one else has seen, the chances of this happening in a hot seller’s market are extremely slim.
One thing hurts more than paying a premium market value for a home, which is missing out on it then learning six months later that it would likely re-sell for 50K more!
For years, economists and market analysts have predicted that the Auckland housing market is in a bubble and is imminently about to burst. Sadly, many people who headed these forecasts held back their purchase decisions for long periods are now significantly worse off as house prices rise each year. The key market drivers of restricted supply, strong demand, historically low-interest rates (even if they increase by 2% - 3% soon) and strong economic growth are all likely to be with us for the medium term. Of course, there has been an odd downward slip in average values due to extreme circumstances in the past.
However, the long term trend has been consistently upward.
This tip links back to my first two tips. In a hot market, there is no time to procrastinate! Yes, of course, due diligence is essential with a property purchase. Once you have checked that you are not buying a lemon, be prepared to act decisively.
Set up alerts on your preferred property websites, so you know the day that a new listing comes to the market. If it looks promising, don’t even wait for the first open home. Call the agent and get engaged as soon as possible.
There are many more tips I could have added. However, these are the seven that I believe are the most important to be a successful buyer in a hot market.
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