Keep control and keep thousands of dollars.
by Peter O’Malley
Many home-owners face a similar dilemma. When it’s time to make a move, they don’t know whether to buy first or sell first.
If they sell first, it may be hard to find another suitable property at an affordable price. If they buy first, it may put them under pressure when selling their current home.
And, high pressure often means a lower price. Just see what’s happening at auctions at the moment. Financially pressured and bleeding sellers mean bargains for buyers.
In recent years, buying first has become common. A healthy economic environment has meant that sellers can usually sell for a good price in a short time. Easy-to-get financial products (such as bridging finance) almost encouraged people to buy first.
Although buying first has always been risky, the risk for is now extreme.
Property stock levels have swelled and sales volumes are well down. Almost every real estate market in the country is struggling. It’s volatile and unpredictable.
The family home is an emotional asset. This is why many sellers tend to overprice their homes. They often make it worse by rejecting early offers, without realising that these offers may be better offers than they’ll ever see again.
When an agent offers an appraisal of a home, the price the agent quotes is simply that agent’s opinion of market value. It’s not a fact. Unless the agent intends to buy the home, the appraisal is financially irrelevant.
The only opinion that matters to sellers is the opinion of buyers who are cashed up and ready to sign on the dotted line. Cash is king these days.
The easiest way to impress someone is tell them what they want to hear. This is why a lot of home sellers place their property for sale with the agent who quotes them the highest price.
But, once sellers sign with an agent, their home then has to compete with other homes on the market. Now that stock levels have risen and sales are down, buyers are shopping on price.
The best buyers come early. They chase the fresh stock not wanting to miss out on the right home for them. If the pricing strategy is wrong, they’ll reject your home and move on.
If you sell before buying, you are under no pressure if the buyers don’t agree with the asking price for your home. However, if you have bought first, you are locked in. You own two properties in a falling market. This can place you in a terrible situation.
As the urgency goes up, the price often comes down.
The buyers don’t care that you need a certain price to make the move. They want to buy as cheap as they can. They don’t care that your neighbour’s house may have sold for a higher price last year. They are only interested in paying today’s price, which they know is often cheaper.
What should you do in this market if you are thinking of selling?
Don’t buy a property before you sell your current property. It’s far too risky.
Sell first. You will then be a cash buyer in a buyers’ market instead of a desperate seller in a buyers’ market. You will have control in a market where many sellers are losing control – and losing thousands of dollars.
When you sell first, you do so on your terms and in your time. In a market like today’s, you’re likely to be thousands of dollars in front if you resist the urge to buy before you sell.
So, in summary, here’s the success formula for selling in today’s market.
Sell first, get the cash and then go and bag yourself a bargain.
Peter O’Malley is a director of Harris Partners, estate agents in Balmain in Sydney.