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First Home Buyers Mistakes when Negotiating
210 Plays2 months ago
In this episode of the Buying Your First Home podcast, we dive into the critical mistakes first-time buyers make, like revealing their maximum budget, and how to avoid them. Learn why lowball offers can backfire, how to handle negotiations like a pro, and the key contract clause that can help you secure your dream home before the competition. Tune in to gain the insights you need to navigate the home-buying process with confidence!
Visit HunterGalloway.com.au for a free assessment and more info on how we can help you on your journey to homeownership.
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Transcript
Navigating Budget Discussions with Real Estate Agents
00:00:00
Speaker
So the other day I came across this post on Reddit. I'm a first-time buyer. I've got a solid deposit and pre-approved place. I'm finding that quite a lot of real estate agents asking what price I'm looking for. And as a robustly honest person, it's been quite hard not to answer with the maximum purchase price I have in mind. The stress is so high that I've developed an eye twitch that may look like I'm winking at strangers on the street. Buying a home can be the most exciting and most stressful time of your life.
00:00:23
Speaker
And I hate to tell you, but by revealing the price of your real estate agent, you may have made the single and biggest mistake first-home buyers can make when negotiating a property price. In fact, according to this real estate agent, you're setting yourself up to get completely rinsed in negotiations. Today, I'm going to show you with proof how to negotiate and secure your first home without making these same mistakes.
00:00:42
Speaker
I'll tell you why you need to avoid a global strategy in the current market, how to call an agent's bluff when you're negotiating your home price, and the simple clause you can include in your contract to secure a home before everyone else has a chance to make an offer. You might be feeling right now you have no idea how to play this home and I can understand it's incredibly frustrating, but by then you're gonna be negotiating like a pro.
Introduction to Buying Your First Home Podcast
00:01:01
Speaker
Welcome to the Buying Your First Home Podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
00:01:27
Speaker
All right, so on to our first tip, low ball offers. You might be in the early stages of buying a home and you definitely don't want to be overpaying. After all, you spent years saving your deposit. But I can tell you right now in a hot market, a low ball offer is the worst thing you can possibly do. The reality is if you're offering lower or under the suggested property price or the offers over price and the properties in high demand, your offer is likely to get completely ignored.
Making Competitive Offers in a Hot Market
00:01:50
Speaker
There's been cases we've seen where property prices have been increasing by an amount of $10,000 a week in the same suburb. Right now, the real estate agents are going to be flush with offers and if you're lowballing, they're just going to go with the next person just to get an easy deal. You need to be going in there completely prepared, not just with the price, but with your pre-approval and be able to do as tight terms as you possibly can. Things like limiting the days for your finance clause and your building impasse with a quick settlement time frame can also make your offer much more attractive. As a first home buyer, the best course of action here is to have your pre-approval in place, make sure it's fully assessed, and have your broker have everything ready to go so you can do some tight finance clause, potentially under seven days to make your offer as attractive as possible. If you're auction ready, you can even consider waving those finance clauses to have effectively a cash offer. Cash offer just means you're not going to have contingent clauses like the finance and billing PES clause, but you want to make sure everything's fine here. So check with your broker to make sure you're in a position to do this.
00:02:41
Speaker
So it's important to understand the real estate market can be highly competitive and the sellers and agents are often looking for the least hassle and the quickest route to finding the sale. If you're serious about buying a home, you need to potentially put a serious offer and meet the market to where it's at right now. Just keep in mind the agent isn't technically obligated to call you back after you've made your offer. So once you've made that offer, it could be your first and final time to put the best foot forward. So when you're getting ready to make your offer, there's some critical questions you should ask the agent to give you some insight since the process and help you strategize
Key Questions and Negotiation Strategies
00:03:09
Speaker
effectively.
00:03:09
Speaker
First, you want to ask the agent how the offer will be presented. Will your offer be shown to the seller simultaneously or one after another? This can affect how aggressive you need to be with your initial offer. Next, you want to ask the agent if he will be informed about other offers. Some agents might tell you if they're doing almost like a Dutch auction or private auction, if there's competing bids, while others are going to keep this completely confidential. Depending on the state, they might make you sign a multiple bid offer form, but they don't always need to tell you if there's another offer on the table.
00:03:34
Speaker
It's also important to ask about the seller's timeframe. Are they looking for a quick sale or do they need to find their next home? Understanding this can help you tailor your offer to the seller's needs. Don't also forget to inquire if there are specific terms that the seller prefers. Maybe they want a longer settlement period because they're going to a retirement home or perhaps they're wanting to rent back their property for a short time after the sale. Lastly, and probably the most important thing is you need to ask if there's going to be a chance to improve your offer.
00:03:55
Speaker
I think this is a big mistake people are making in the current market. They're assuming, yep, I'll have another chance, to another bite of this cherry to put an improved offer on there. But if the agent's saying this needs to be your best and final offer, then you need to reconsider your strategy right now. Most importantly, with all these questions, the knowledge helps you manage your expectations and reduce the anxiety of just waiting and saying, well, hopefully I don't miss out on this home.
00:04:15
Speaker
There's nothing worse than losing out on our property and wondering if you just offered a little bit more, you could have bought it. Knowing the process upfront and what your options are are going to help you feel more confident in your decisions. Just keep in mind with real estate, as with all negotiations, information is power. The more you know about the process, the better equipped you're going to be to make smart decisions and hopefully land your dream home without overpaying. So don't be afraid to ask these important questions.
Setting Limits and Making Firm Offers
00:04:36
Speaker
A good agent should be fine to provide you that information. All right, step two, negotiation tactics.
00:04:41
Speaker
So, do you tell the whole truth and nothing but the truth or do you just accept that the other team or the agent is a liar in a cheat? Well, according to this real estate agent, deception and lying are just part of the game. This real estate agent that works in the wider Brisbane area says, just like when you learn to drive and assume everyone else on the road is a psycho, assume every agent is lying. You should always ask about issues and always ask their offer negotiation process.
00:05:04
Speaker
Will I get a chance to improve my offer and if so, will I be contacted to do this? Negotiations can be tricky, especially if you feel like you've been pressured to increase your offer. This is where it gets more and more important to be firm with your offer and your negotiation skills and try and call a bluff if it happens. Understanding the seller's motivation and market conditions can help you navigate the negotiations more effectively.
00:05:23
Speaker
While it's important to be competitive, knowing your limits and sticking to them can help prevent you from overextending financially. But also keep in mind you want to negotiate in terms other than price. So things like settlement date, deposit amounts can give you the edge in negotiations. So the most common tactic realizations used is creating a sense of urgency or competition.
00:05:40
Speaker
Now they may not need to feign this because in the current market and a lot of places on the East Coast, it's genuinely busy and there's more buyers than properties available. This seems to happen almost every time when the agent says there's another offer out there and whether it's real or not to create competition, it's hard to know. The reality is if you want the home, you need to go in there with your best foot forward.
00:05:57
Speaker
Now what I mentioned is these tactics can be particularly impactful if it's your first home. that It is emotionally taxing in these high pressure situations and it can really wear you down after time. The thing is you need to be aware of it. You might experience increased levels of stress and find it difficult to make rational decisions and end up with biased remorse if you rush a decision or you take too long to make that decision. So how do you maintain your composure during these negotiations? First, set clear budget limits and stick to them. No matter what pressure you're on, don't exceed the maximum budget, which you've generally discussed with your mortgage broker. You wanna become a suburb expert. You wanna ideally narrow down to three suburbs maximum, take time to understand and research those suburbs, what the houses or units you're looking at have been selling for, because at the end of the day, knowledge is power in the situation. If you know a two bedroom unit in the same complex sold for $500,000 a month ago, well then you know your maximum offer is gonna be around 500,000, maybe a touch more if you're in a rising market.
00:06:48
Speaker
You wanna prepare your offer and put it forward, but at the end of the day, always remember that there's gonna be other properties available. Don't let yourself get pressured into a decision you're not comfortable with. Knowing when to walk away from a deal is just as important as knowing how to negotiate. And I guess it's worth adding some situations where you might wanna walk away from negotiations. If there are significant issues raised during the building pests, like red flags,
Legal Considerations and Deposit Strategies
00:07:08
Speaker
don't ignore them. Small things can end up being big things if left unchecked.
00:07:11
Speaker
Or if you feel excessively pressured or uncomfortable with the process, it's okay to walk away and find the next home. Buying a property is a huge deal. It's okay to take your time, ask questions and walk away if it doesn't feel right. Don't let these tactics push you into a decision you're not ready for, which leads to our next point, a solicitor review clause.
00:07:28
Speaker
In the current market, a lot of the agents are trying to get offers on a Saturday or Sunday, get you to sign a contract and then put it to the seller to review. So it can make it tricky because your solicitor may not be working on the weekend. It's like, well, what do I do? How do I actually make an offer if no one's looked at the contract to sale? So unless you're a lawyer, you're not going to feel incredibly comfortable with signing a contract to sale without someone else checking it first. Adding a subject to solicitor review clause in your contract can protect you from these potential issues. If your solicitor finds an issue, you'll have a safe avenue to pull out of the contract.
00:07:56
Speaker
Speak with your solicitor on the exact wording you need to put in the contract to sale under the special conditions to cover you from this. The reality is many buyers will refuse to sign a contract until the solicitor has looked at it. But because the solicitors don't work Saturday, the contracts might have been signed and the ship could have sailed on your property before Monday. It sounds pretty brutal, it sounds high pressure, but it's the reality of the current market. If you want to be ready to go, even if you haven't identified a property, have a chat to a solicitor or a conveyor to understand what you need to put in the contract if the right home comes up at the weekend.
00:08:25
Speaker
Because from what we've seen lately, properties can easily sell on a Saturday and Sunday right before your solicitor opens up on the Monday morning. Our next tip is more specific for Brisbane and Queensland properties, but it's for the initial and balance deposits. Now, this is an interesting one that an agent recently highlighted to me, and he said that a large initial deposit can make your offer more attractive to sellers because they're showing that you're pretty serious and financially capable.
00:08:46
Speaker
This is an interesting one because if you're the only contractor sale, it's not going to really matter. But if there's multiple contracts of sale, they're all at $500,000, your high deposit could just mean, well, this guy looks like they got a bit more money than these other two people who've got a smaller deposit and it's going to help you. An initial deposit is a bit of a show of good faith. It's an amount that you put down when you buy a property. It's usually held in a solicitor's trust account and shows that you're serious about the purchase. You don't need to pay this initial deposit until the contract's actually accepted. And also, if the contract gets terminated because of your finance clause or that subject to cost review clause, you'll generally be able to get this initial deposit refunded. The balance deposit that's paid once your finance is approved, really building in pest clauses are all satisfied, is the remaining deposit you'll pay before settlement.
00:09:24
Speaker
Every little bit can help. So having a large initial deposit can provide you with a bit more leverage during these negotiations. Cells might be more likely to negotiate on other terms. It just shows you financially committed to the transaction. And the reality is you still need to put down your five or 10% deposit. So you're going to have to come up with this money at some point. It just means you're having to put the money in a bit earlier in the transaction rather than waiting until settlement in 30 days time.
Researching Market Trends and Agent Interactions
00:09:44
Speaker
Five, current market trends. Now, while prices in some suburbs have increased significantly, others have shown soil growth. So although I've been talking about how it works in a really hot market with global offers, if you're in a slower market, then the opposite could be true. But the reality is every city, every state, every market is going to be different. So it's essential to do research on the specific suburbs you're interested in. Like I said earlier, you want to become a suburb expert in three suburbs, maybe a maximum of five. So you deeply understand how the suburbs work,
00:10:12
Speaker
how you should make your offer art and how it needs to be presented. Suburbs can vary widely in terms of price and demand. Some areas might be experiencing rapid growth because of new development, better schools, infrastructure, and families could be driving up prices. On the other hand, areas targeted by investors might have steadier, slower growth. Understanding these trends helps you make an informed decision. Some tools that can help are the Heron Todd-White Month in Review, I'll include a link below, and just checking out the days on market and the areas that you're looking at buying.
00:10:37
Speaker
Six, our last tip when inquiring for properties. This is an interesting one that I was told about another agent recently. When you're inquiring about a property online or looking at putting an offer on there, the agent said something to do is on the real estate or demand inquiry. There's usually a dropdown box that says I'm looking at buying a home to live in. I'm looking to invest.
00:10:55
Speaker
ah The real estate agent said, if you put in there, I'm looking to buy and sell, the agent will call you back straight away because they're going to think, well, they're thinking potentially they're going to get you to buy the property, plus they're going to pick up the sale listing from the home that you're looking to sell. But if you want the agent in your corner, realistically, you need to show that you're keen on the property. You've got a good means to purchase and you're ready to make an offer once you've seen it.
00:11:14
Speaker
As I've said earlier, you're not going to reveal how much deposit you've got, how much house you've got, but you can say, yep, that's within my budget. ah Yeah, um I'm pretty flexible with price. I've got a really strong deposit. I'm ready to go. Realistically, all the agent wants to know is that you're serious. So by mentioning that you've already spoken with your broker, you've got a pre-approval, you're good to go. It can make you seem like a more serious buyer than someone that's just starting off and doesn't know what to
Avoiding Common Mistakes in Real Estate Negotiations
00:11:38
Speaker
do. So hopefully you learned some of the big common mistakes that first-home buyers make when they're negotiating with a real estate agent.
00:11:44
Speaker
As I said earlier, giving away your exact budget can be a good way of getting rinsed in the negotiation. So my advice would be if you're looking at buying a home is when you're making an offer, speak to your solicitor to get that subject to solicitor review clause to allow you to make an offer on the weekend before the offices open on Monday.
00:12:01
Speaker
Remember, a lot of homes sell on a Saturday night, so you need to be prepared to make an offer on the weekend outside of regular hours. Secondly, avoid any lengthy special conditions. If you want the dishwasher or other things like that, potentially get your solicitor to add that in after the fact or do a set. You can add extra conditions like include an outdoor table, but if it's subject to the sale of another property, it's it's going to make it more difficult for them to accept your property.
00:12:24
Speaker
Third, do not lowball a hot property. Even if you have more to spend, the agent's likely to go and jump on the next offer or someone that's higher without even getting back to you and not even giving you a chance to increase your offer. Fourth, a bigger upfront or initial deposit can make you look more secure in every instance. According to some agents, a large balance deposit and small initial deposit look like an uncommitted buyer. Hopefully, these tips will help you buy your home. Let me know which was your favorite.
Hunter Galloway's Services
00:12:49
Speaker
At Hunter Galloway, we're the home for home buyers across Australia. We help lots of first home buyers with tips like these and the strategies to get into your first home quicker. If you want some help with your finance, hit us up at huntergalloway dot.com.au. We're mortgage brokers. We don't charge any fees for our services. That's it for today, guys. Let me know what you think in the comments below. Which is your favorite negotiation tip and tell me what you've seen agents do when you've been in the market. All right, guys, until next time, see ya.