If you want to make sure you never overpay for a property it pays to keep your emotions in check.
I pride myself for never becoming emotionally entangled in a property purchase, but that’s easy for me because I am an accountant by trade. I’m pretty sure most accountants are born without emotion anyway!
But what about when you are after that family home, or your first investment property? Here are five tips that I use to ensure I never overpay for a property. Ever.
Get a professional valuation
This is by far the single biggest tip I can ever share with anyone not wanting to overpay for a property.
BEFORE you make an offer, get a professional valuation (for a few hundred dollars) and never pay more than you should.
The valuation is returned with a price range. Stick to the price range and you will always pay a fair price.
This is something every expert does, but almost zero “amateurs” do.
Get your inspections done BEFORE you make an offer
Most people carry out building, pest and strata inspections after they have already made an offer on a property. This makes it incredibly difficult to renegotiate your position if the inspections uncover problems you didn’t know about. It can be a very expensive, especially if the inspections mean you have to pull an offer altogether after a deposit has been paid.
Instead, if you are serious about buying a property, get all the facts you can upfront. You want to make sure your offer matches the condition of the property and any work required. Factor in any foreseeable costs when you make your offer.
Most people still won’t do this. They think, “what if I pay for all the inspections and the offer is rejected?”
In my experience, if you make an offer with the inspections already completed and present a fair offer based on a professional valuation, it’s very hard for sellers to turn that offer down.
More importantly, what if you make an offer that’s accepted only to find out the building has significant concrete cancer? Or worse.
You always want to play your own game when purchasing property… not theirs.
Make your offer conditional
The mistake most people make here is that they make an offer on the property and then wait for a response.
This hands the advantage to the selling agent. They can go back to any and all interested parties and start driving the price up. They do this using emotion and the fear of missing out. Sound familiar with any of your experiences?
Instead, when you make an offer, make it on a signed contract, with a 10% deposit and 66W certificate just before 5pm mid week. Tell the agent it’s only valid until 9am the following morning.
Present the offer with accompanying evidence of an independent valuation, plus any information obtained during inspections. It’s hard to argue with facts and the selling agent knows this when presenting the offer to their clients.
Remember, most agents are simply not able (or too lazy) to put in the work that evening to drive the price up. They realise they may also miss a sale if they don’t negotiate with the seller.
Definitely DO NOT make an offer before the weekend as agents will simply use your offer as a negotiating tool for other buyers during open homes that weekend.
Stick to your guns
If the offer is not accepted by 9am the following morning, you must revoke the offer, pick up your contract and cheque, and wish them good luck.
Even when you make it clear how your offer will work, the selling agent will still try and move you to play their game. They will try and get you to extend or change the terms of the offer.
Don’t. It just gives them a bigger advantage and drives the price up.
Sometimes your offer won’t be accepted, but that’s okay. Don’t overpay for a property and regret it later.
Again, selling agents want you to play their game, where the ball is always in their court. Never fall for this trap. Always play by your own rules.
Hire a buyers agent
Last but not least (and I may be a touch biased here), hire a buyer’s agent.
Buyer’s agents already have relationships with selling agents, so it’s much easier for us to cut through the BS.
We know every trick a selling agent can play (and there are a lot) and how to navigate the rough waters.
Buyer’s agents also don’t have the same emotional attachment that can cost new home buyers tens and in some cases hundreds of thousands of dollars. This is a very good thing.
Best still, a buyer’s agent fee should more than pay for itself when you consider they can find the properties, inspect them, get an independent valuation, arrange building, strata and pest inspections, make the offer, get a fair price and walk you through the entire process.
This is an edited version of an article that was originally published on Your Empire.
This article contains general information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances and issues.