This post is a continuation of my previous post on some tips if you are purchasing your first home.
Example One – “You only get once chance”
When a property is up for sale, the current trend is for the buyer to get only one chance to make an offer. Unfortunately, this is stemmed from the demand for properties however I am not so sure if this “rule” will stick around if the property market slumps. The idea is, a group of buyers make their offer and terms of sale and these are put forward to the vendor who picks the best deal.
Now, I never understood why it’s the best option for the vendor. I would have thought the more buyers, and more chances they get the better the price obtained.
I got done by an estate agent who offered me one chance only at buying an apartment at Kensington. It’s a up and coming suburb in Melbourne’s North West, close to the city center. The disappointing thing was, the property sold for $338K, and my offer was $332K. Had it come back to me, then I would have offered $340K and closed the deal. So in this particular case, the vendor lost.
Example 2 – “You might find a few thousand more under your couch”
This is a classic example of how a real estate agent can waste your time. My offer for a townhouse in Blackburn stood firm at $435k. The agent states: “You might find a few thousand more under your couch”. So I thought, I must be close and make an offer of $440K. Done deal I thought. What a waste of time!
The agent was playing my deal against another buyer, and had obtained a price of $458k which it sold for. Now, my maximum for that property was $450K, so in this case the vendor cashed in. Don’t ever fall for this trick, which brings me to an important concept in property. The walkaway price! This is the price you will turn your back on the property, and walk away from the deal no matter how close you are to securing the deal. I found out about this concept quite late in my buying venture. Never let emotions get in the way. Emotions could cost you thousands of dollars.
For example: I attended an auction for a property in Box Hill North for a burnt out house. The auction was hot, and the buyer lost control and bought it for $419K. Turns out, he couldn’t afford it, the bank turned it down, so the property came back on the market.
Example 3 – “It has to be unconditional”
This is the biggest bulldong ever. Never ever make an unconditional offer. Having a pre-approval for a loan DOES NOT mean you have got the loan fully approved. The normal process is: you get a pre-approval, make a purchase, inform the bank, the bank makes a valuation (if deposit is < 20% although in the current economic climate the deposit required might be more), and then approves the loan if the valuation meets your purchase price. If it does not, then you are liable for the difference.
When a real estate agent says he has received an unconditional offer for a property, then it means: 1) The buyer is extremely rich, or is playing with his equity in an existing property, 2) The buyer is not very bright, or the more likely option is that the estate agent is completely bulldonging you. I almost got sucked into making an unconditional offer, but retracted at the last minute because of the huge risk.
I inspected a property in the Eastern suburbs of Mebourne, where the estate agent (who still rings me about properties) boldly stated he has received an unconditional offer of $380K, and I must make an offer by 6pm that day to be considered. I knew he was lying, however it turns out he wasn’t and the property sold for that amount. The buyer was an investor with plenty of money in the form of equity, so I simply could not match an unconditional offer. Sometimes you lose!
Example 4 – How an estate agent “cheated” me out of a sale.
This was just classic case of screwing the buyer over. I had made an good offer for a property in the Eastern suburbs of Melbourne. Days passed, and after repeatedly calling the agent I received no response. The offer was on the table. One Sunday I drove to the house to show my brother, and I saw the estate agent getting out of his car with a folder. Immediately, I knew what was happening.
It turns out the agent behind my back sold the property to another buyer for a lower price. That’s right, a lower price! The agent had decided to pick and choose who he would sell it to.
After investigating the rules of engagement on REIV website, the process just wasn’t worth pursuing further.
In my next post, I will talk a bit more about buyer’s agents and how VIP Consulting helped me with my purchase.
[...] did I choose a Buyer’s agent? If you haven’t read my experiences of trying to buy property myself, then do so. It will give you a sample of what is potentially heading your way if you plan to do it [...]
Do you think Estate Agents tell you they have another interested buyer, just to get you to decide quicker?
Yes, they do. They use “scare tactics” and feed off the ignorance of some buyers (especially first home buyers). I have got sucked in a couple of times as you can read in my examples, but thank fully there were others who were sucked in every more so I escaped.
When an agent says he has other offers, ask: “is it in writing”, if so “can you see them”, usually the answer is no. If it’s not in writing, and not shown then you can kind of figure out if they are lying or not.
Agents lie all the time, and although they have to meet ethical standards when dealing with vendors and buyers, there is much difficulty in proving it due to the confidentiality laws etc. In my case, the agent’s that sold the property without giving me a chance to bid or put forward my offer for a property is First National Real estate in Victoria. Terrible estate agents. When confronted about their poor ethical standards, the guy got defensive and said: “let;s forget about all this”.
Never purchase a property without having any plan for it. Investors are snapping up properties nowadays because of their affordable prices.