Key points
- Home buyers know property prices are falling, and some are trying to make lowball offers.
- The risk in making a low offer is that a vendor may be offended and choose to negotiate with another interested party.
- Someone who likes a home but cannot afford it may be better served by asking an agent to contact them if the property passes in.
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Home hunters who make lowball offers for properties they like as prices fall risk missing out on the place of their dreams.
Potential buyers who read about economist forecasts of 20 per cent property price falls by next year are in some cases making bids well below a home’s price guide before realising the market has not fallen that far and another buyer has offered more.
Buyers are making lowball offers, but if they really like a property, it might be more effective to stop and think again.Credit:Luis Enrique Ascui
Agents warn some vendors will take offence at opportunistic offers for their family home and refuse to engage with that buyer, and that although property prices are falling as interest rates rise, the best quality homes are still attracting competition.
In Sydney, The Agency North’s Catherine Murphy recently had a keen buyer whose relatives got involved and insisted on reducing the offer.
“The vendor said ‘forget it’,” she said, but the buyer intervened and wanted to proceed with the original price.
“There is a risk of offending a vendor and not getting it at all if another purchaser comes in at a better level — because they have a bad taste in their mouth,” she said.
Instead, she advised buyers who like a home but cannot afford the asking price to approach negotiations with sales evidence, listing examples of similar properties that have sold nearby recently for less.
“Put it in writing to say ‘I like this house, I think it would really work for me, I’m not at your guide,’” she said. “[Say] ‘If it does pass in and they change their mind, please come back to me.’”
She also cautioned buyers to recognise whether the home they liked was considered A-grade and attracting interest from other parties.
In Melbourne, lowball bids are becoming more common in the affordable outer western suburbs, Barry Plant Melton’s Ned Nikolic said.
Home buyers are cautious as property prices fall.Credit:Chris Hopkins
“People are listening to the news, and seeing that there’s not as many people at the opens,” he said. “People can try, but in reality it is not happening — in reality it is just offending the owners.
“I don’t think owners are desperate to sell; the vendors’ motivations haven’t changed in the last two or three months.”
He said genuine buyers who made a reasonable offer were the ones winning properties.
Someone who could not afford a property they liked might be better served by explaining their budget to the agent and asking whether it was worth trying or not, or leaving their details in case the home was still on the market in a month or two, he said.
Buyers soon realise if another party is willing to offer more for a home they like.Credit:Peter Rae
OBrien Real Estate Frankston’s Mark Burke is fielding lowball offers from potential buyers who have not even seen a property, perhaps investors offering 10 per cent below the bottom of a price guide.
“The market is not armageddon,” he said. “There’s certainly an adjustment.
“If you get too smug and smart alec, the owners won’t take it seriously.”
He recommended first home buyers on limited budgets set a limit and bid to their limit at auction, or contact him straight away after a home they like passes in at auction, although he felt few auctions in his area were passing in. Anyone who wanted to make an offer at a low price should be prepared to go higher during negotiations, he said.
Other buyers are making low opening bids at auction, in contrast to the knockout opening bids more common during the market’s peak growth phase last year.
On Saturday, a Hunters Hill house fielded a low opening bid of $3 million, which the auctioneer knocked back as it was well below the $3.8 million price guide. The home sold for $4.47 million.
Although Ray White Surry Hills’ Ercan Ersan has not received lowball offers yet in this cycle, he has had buyers start bidding lower than the price guide at auction.
He had a recent auction with a price guide of $1.4 million to $1.5 million that drew three bidders. It began at $1.3 million and closed with a $1.51 million sale. He wondered if the result would have been the same if the opening bidder had begun with a bold bidder of $1.5 million.
“I’ve always been a big advocate of being quite bullish with bidding,” he said, advising buyers on a budget to bid confidently to their limit and not get emotional or overspend.
“Whatever the property is worth, it is going to get there.”
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