04 Feb Don't believe you can't overpay in a slow market – Rich Harvey
Home buyers are just as much at risk of overpaying in a slow market as in a fast moving one according to Real Estate Buyers Agents Association President Rich Harvey. Rich gives us his five tips for buying well in 2019.
Kevin: One of the greatest fears for every home buyer or anyone buying a property is that they’ll pay too much for it. Interesting research out from the Real Estate Buyers Agents Association indicating that it’s just as risky or you’re just at much risk of overpaying for a property in the slow market as the fast one. Joining me to talk about this, the president of REBAA, Rich Harvey. Good day, Rich. How are you doing?
Rich: Very good, Kevin. Good to be with you again.
Kevin: Yeah, it’s an interesting thought because I always thought it’s easy to do it in a fast market where you’re in competition and you can actually overpay but you say that it can happen in the slow market, too. What are some of the ways that we can make sure that doesn’t happen?
Rich: Well I think just firstly, Kevin, the reason that people think they’re getting a bargain is that they’re looking at the prices relative to what was say six or 12 months ago. But, if the market is still continuing to fall, what buyers don’t realise is that there’s some vendors that actually might even be more negotiable than what they think.
Rich: You often don’t know that you’ve paid a fair price or paid too much until well down the track. Some people don’t really know. It’s not like you’ve got the property price of every house up on a screen like the share market every day. It’s a very different scenario. I think it’s one of those things where you do need to be very cautious about what price you pay. You don’t want to miss out obviously and try to really provide just completely lowball offers to try and pitch something. I think the way to do it is to look at relevant comparable sales and look at the pace of price fall and monitor those border market conditions. Make sure that you go in fully armed with all the facts before you make any offers.
Kevin: Yeah, I think it’s a key thing is that make sure you go in fully armed with the facts and know the price that you’re willing to pay at that very point in time and not get caught up in the hype.
Rich: It is about timing. A lot of people say, “Oh, look. I’ll just sit out of the market and wait until property prices crash 40%.” Well I don’t believe they’re going to crash anywhere near 40%. We’ve had a 10% drop in Sydney and about 6% drop in Melbourne. I think we’ve got a little bit more to go, not too much more. But then you look back in hindsight and go, “Oh, why didn’t I buy in 2019? Why didn’t I go for it?” You’re never going to know unless you have a go.
Kevin: I guess you’ve got to be concerned too that you don’t get consumed with making sure you don’t overpay otherwise you may just never buy anything-
Kevin: -if you become too scared.
Rich: That’s right. Exactly and I think it’s important to think long term, If you’re buying a property for a home or for an investment. And I often think it’s not about so much looking at the short term price more about thinking about the long term gain. If you’re moving into a home you’ve got to consider your needs for the next five to 10 plus years. If you’re raising kids, you’re going to need schools and shops or if you’re getting toward retirement you want something that’s low maintenance. They are the things to look for and likewise if you’re an investor you need those key drivers to make sure there’s going to be strong capital growth for the property that you buy over the long term.
Kevin: Let’s stick with the scenario of buying in a slow market which in some areas of Australia we have right now. How important is negotiation?
Rich: Absolutely critical. A lot of people love negotiation. I love it. It’s very important to make sure that you don’t just go in with your best offer and walk away. It’s about looking for opportunities and I think there’ll be some great opportunities out there.
Rich: It’s also important to realise that if you don’t do negotiating for a living, you’re working against an agent there that’s trained in negotiation. You’ve got to remember that this person you’re speaking to on the other side of the transaction is an expert. Not every person is but not every real estate is the sharpest tool in the shed but there’s plenty of agents out there that they’ve got to do the right thing by their vendor and get the highest price.
Rich: Negotiation is a science. It’s a game and you’ve to be really well armed and know how the game works to make sure you get the best outcome possible.
Kevin: Yeah, talking about negotiation because I think it’s a fascinating subject. I mean property markets are different in different parts of Australia. Everything’s different. Every house is different but so to is the motivation of the seller and a lot of that motivation comes down to just how negotiable they are.
Rich: Correct. That’s right. You don’t know how fast someone needs to get the cash. Some people are sticking to their guns on a price, others need to move next week because if they don’t then some other bridging finance or some other factor is going to kick in which is going to cause them stress.
Rich: A lot of people just like things to be done. They just have a thing on their list. They go, get the house sold in 2019 and they’re also looking at the next house they’re buying. They’re thinking, “Well I’ll get a discount on that,” so they’re happy to take a lower offer. Sometimes you actually can be surprised at what kind of prices you can accept.
Rich: I remember coming back to work one year and I’d made an offer on a place in late December and the agent said, “No way Rich they’re going to take that offer.” Come back on the seventh of January and they ring and say, “Yup. Rich, is that offer still on the table?” I say, “Absolutely but I’m not offering anymore.” I say, “Let’s get it done.” Sometimes if you just stick around long enough, it’s a bit like tennis. You just got to be on the court the whole time hitting the ball and you never know which one’s going to land in your lap.
Kevin: Yeah, too. That’s such a good tip too and I think it combines with something you said earlier about thinking long term. Don’t be caught up in the short term game because if you do there’s every chance you won’t buy anything because you are thinking too short term. I think you’ve got to look at that five to 10 year scale and look at it as a long term game.
Rich: That’s exactly right. I don’t think [inaudible 00:05:23] people thinking right now in beginning of 2019, “Gosh. If I buy now and I lose say 5% of the value of my million dollar property, wow I’m never going to recover.” Well in 10 years’ time it’s highly likely that property will be 50 to 70 or maybe even 100% more than what you pay for it over a period of time. Losing 5% in the short term is nothing compared to getting in when there’s less competition, when there’s less demand for properties but buying a quality property that’s going to stand the test of time is the key.
Kevin: Always great talking to you my friend. Rich Harvey. Rick of course is the President of the Real Estate Buyers Agents Association of Australia. Thanks for your time Rich.
Rich: Great talk. My pleasure, Kevin. It’s always good to talk. See you soon.