How to keep a cool head in a seller’s market
Looking for the right home at a bargain price? This may be like finding a needle in the haystack. Be prepared instead to compete with other buyers if you are looking in popular areas, finds Angelique Ruzicka.
If you want to buy house or flat in a popular suburb that’s zoned for the most sought after schools – be prepared to encounter frenetic competition where some buyers are even willing to offer sellers at or over the asking price.
Richard Grey, CEO of estate agency Harcourts says that the housing shortage has lasted about two years and is also largely due to the fact that new homes are not being built at an adequate pace to keep up with the demand. “Two years ago there was a lot of [property] stock on the market but now that has cleared out,” he explains.
But there are other factors that have resulted in sellers having the upper hand. Banks have relaxed their lending criteria and home loans are cheaper. “We have also experienced the lowest bank lending rate in decades, which has fuelled the desire to own property,” explains Lew Geffen chairman of Lew Geffen Sotheby’s International Realty. While this is good news for those wanting to get into the market it also means there are a lot more people that qualify for home loans, resulting in the high demand, low supply situation that buyers are finding themselves facing.
The buyer’s handbook
Even though buyers are at a disadvantage there are some things that they can do to tip the scales in their favour, say the experts:
1. Get pre-approval for a home loan: “If the offer on the property is unconditional, i.e. not subject to things like getting a bond your offer will be looked upon favourably,” says Grey. So unless you are a cash buyer try and see if you can get a home loan from your own banks or bond originators like Ooba.
2. Be well informed: “Know your market before you get into it. Find out how much homes are going for in the area that you are looking at. Get the estimates from estate agents that operate in the area. You can even demand to see prices of surrounding homes from the agent you are buying from,” advises Grey.
3. Deal with a reputable agency: “As a purchaser the estate agent is not your enemy; he or she is there to ensure that a sale is concluded to the mutual satisfaction of both parties,” says Geffen.
4. Ask for advice on how best to present your offer: “If your offer is first on the table you can for instance ask for a “first and last refusal” clause, which is quite standard and both morally and legally correct. An experienced and reputable agent will talk you through these options,” says Geffen.
5. Don’t give into emotion. It may be hard to compete for a home but it may not be worthwhile to stretch your budget just so you can get that ‘dream’ home. “The only way to manage your emotions is to do your homework. Ask yourself if you are comfortable to afford the cost of living going forward [if you purchase the home]. Find out your upper limit and it will help you in the ‘buying a home’ minefield,” says Steven Barker head of home loans at Standard Bank.
6. Make sure you have a good credit record: “The bond application decline rate currently sits at around 50%, but in an overwhelming majority of cases bonds are declined because there is a problem on the side of the applicant. Banks are extremely cognisant of risk, which is why things like a spotless credit record is so important if you’re considering buying a house,” says Geffen.
7. Register your interest: “The best way to know exactly what’s available is to list yourself with estate agents in the suburbs that interest you, because when they have new stock available that meets your criteria they’ll contact you first before they start marketing the properties publicly. “Often owners want a quick sale and are willing to negotiate on price if it means the transaction will be concluded speedily. This also means having your ducks in a row, like getting pre-approval for a bond,” says Geffen.
If there are several bidders or one or two bids more favourable than the one you’re putting on the table the general advice is to not get panicked into offering the asking price. “Separate your emotion from the pressure as it can be very costly if it goes wrong,” says Barker. “Make sure you can afford the property, associated costs and future rate increases.”
Ultimately, it pays to be flexible and accommodating to the sellers. “The reality, though, is that this is currently a seller’s market so if you’re set on a hard negotiation be aware that there are likely to be one or two others making offers on the property as well, especially if it’s under the R5 million mark. If there are two similar offers on the table, be willing to be flexible on contract terms such as extending the period before taking occupation – especially if the seller hasn’t yet found a new house. It’s small things like that, that could ultimately swing the deal in your favour,” advises Geffen.