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How to buy and sell property in a pandemic
If you've got a job, experts say now is as good a time as any to buy a property.
With public auctions limited to 10 people and daily headlines about unemployment queues, buying or selling a house during the COVID-19 crisis might seem like risky business.
But with record-low fixed home-loan rates and economic uncertainty sending housing prices tumbling by up to 10 per cent across Victoria, it’s also a great opportunity for cash-ready buyers to snap up a property bargain.
“If you’ve got a job, now is not a bad time to be looking,” says REA Group chief economist Nerida Conisbee.
Despite some nervousness about the outlook for property prices, Nerida says activity on the REA site over the past month provides some positive insights. “First-home buyers are more active now than this time last year, search activity is pushing up, enquiry levels aren’t bad and we haven’t seen any noticeable trend in distressed sales amongst investors.”
And there are plenty of people window shopping. Marty Stanowich, head of marketing at ibuildnew, an online aggregate site that helps people compare and buy new homes and house-and-land packages, says people are still engaged and looking to buy.
“The amount of time people are spending on our site has increased and they are looking at more listings. We’ve also seen an uptick in first-home buyer enquiries,” he says. “People are still very interested in buying newly built homes but no one is in as much of a rush. It just appears that the ‘research’ stage has lengthened.”
It’s a similar story in the established property market, where both buyers and sellers are treading cautiously.
“Nobody is chomping at the bit to buy something,” says buyer’s advocate and resident expert on Channel 9’s The Block, Nicole Jacobs. “A lot of people are still waiting to see if the market drops further. But if it’s the right property and it sits within your budget and you have job security – now is as good a time as any to snap it up.”
If it’s the right property and it sits within your budget and you have job security – now is as good a time as any to snap it up.
Economic uncertainties aside, Nicole says, people are still buying and selling in this market. “There are people who sold prior to COVID-19 and have to buy, we’ve seen an influx of investors coming back, and then there are people who are upgrading or who have actually been looking and are in the fortunate position of just waiting for the right property to pounce.”
Still, the process looks a little different these days, with open for inspecions and public auctions limited to 10 people, plus the real estate agents. “By and large, realtors have moved to private and off-market sales,” Nicole says. “And buyers are becoming quite savvy in their negotiations with the vendors.”
So, whether you’re a first-home buyer, an investor looking for a bargain, or you have to sell, these are Nicole’s top tips for buying (and selling) houses during the COVID-19 crisis.
How to buy and sell property during the coronavirus pandemic
Do an inspection
Virtual walk-throughs are great during the research phase but, if you’re serious about buying, Nicole says seeing a place in real life is still crucial. Vendors are now offering one-on-one inspections, by appointment only, and with a stringent vetting process. (Up to 10 people will be allowed to attend open for inspections as of 11.59 on Tuesday 12 May). “The agent will probably ask if you’ve driven past, if you’ve looked at the video online and if you’ve got your finance approved and in writing,” she says. “If so, they’ll be happy to meet you at the property at a certain time. They’ll generally provide you with hand sanitiser or gloves and then you’ll be able to go through.” Current restrictions dictate that only one person is allowed on the premises with the agent at any one time.
Do your homework
Doing due diligence is imperative whether you’re buying during a pandemic or not. “You need to know where the house sits in the market price-wise,” says Nicole. “Check out the statement of information but always do your own research into what similar properties in the area have sold for.”
Nicole says vendors don’t always compare like for like. They may make comparisons based on the number of bedrooms rather than land size, or on the age of the home rather than its position.
“Jump online and have a look,” she advises. “Google the address and check out the street view of similar properties that have sold in the area to give you an idea of whether the asking price is fair.”
Due diligence also includes asking if the property has had anything done to it since it was online last, checking in with the local council about permits and getting contracts checked.
It’s also worthwhile visiting landchecker.com.au, which has details on about eight million properties across Victoria and NSW, including up-to-date information on planning applications, zoning, overlays, cultural heritage indications and burglary statistics, as well as land size, sales history and other information you need to make an informed choice.
Don’t get seduced by price
While price is important, Nicole says it shouldn’t be the only consideration in the purchase process. “Don’t just buy something because it’s cheap,” she says. “Position is also important. You want to buy close to infrastructure, especially if you’re an investor, so that you can attract a broad market.”
Don’t rush into anything
During times of crisis, Nicole says people are more likely to make rash decisions. This goes for both buyers and sellers. If people are panicked or cash-strapped, they might be more inclined to make or take an offer. “Sometimes people buy because they think a property is really good value – but they haven’t looked at all the other things,” she says. “You still have to make really good decisions.”
Get a building inspection
If you’re not planning on doing a knock-down rebuild, doing your normal due diligence includes getting building and pest inspections. “This may not make you pull out of a sale, but it will provide a detailed report highlighting any visible issues or defects with the property and give you confidence in your purchase decision,” says Dan Watts from Rapid Building Inspections.
Understand the risks
“Purchasing is not without significant risk, the consequence of which can be significant to the buyer,” says Chris Lane, general manager of ThinkConveyancing.com.au. “When buying a property, taking advice should be the first and last thing anyone, let alone a first-home buyer, does in a transaction. Your conveyancing lawyer is your advocate. Their role is to understand your needs and help to set up the transaction to both meet those needs and to manage risk.”
Understand the rules of engagement
With a ban on physical auctions (which will be lifted on Tuesday 12 May), more vendors are opting to sell privately, so understanding the type of sale, and how the agent plans on running it, is paramount. Nicole says private property sales typically fall into four campaign types: Expression of interest, best offer, auction and private sale.
“Expressions-of-interest and best-offer sales favour the vendor,” she says. “If you are going to buy something under those conditions, it’s really important to ask the agent the rules of engagement up front so that you’re aware of how they are going to run the sale.”
In a private sale, the property is advertised (within a listed price range) and prospective buyers submit offers. The final price is then negotiated between the vendor and the prospective buyer, usually with the help of an agent. If there is more than one party interested in the property, this can then lead to a private or boardroom-style auction, which is held behind closed doors and is accessible only to registered bidders.
One of the benefits of a private sale is that the contract can be conditional. If the vendor allows it, the buyer can make the offer subject to finance or a satisfactory building inspection report. There is also a cooling-off period of three business days (with exceptions).
Expressions of interest sales
Sales by expressions of interest (EoI) are when potential buyers are asked to submit a written offer by a specified date and time. Once the submission time has closed, the agent will submit the offers to the vendor. If your offer is within the price bracket listed in the statement of information, but not quite what the seller was hoping for, you might get an opportunity to submit another offer. “Always ask if you are putting in an offer to get on the dance floor, or if the first offer is final," Nicole says.
Best offer sales
In a ‘best offer’ campaign, the agent will ask you to submit your first and final offer. If someone makes a higher offer, you generally won’t have an opportunity to adjust your price. Nicole suggests submitting your best offer with a timeframe for acceptance. Putting an expiry time on an offer can shift the balance of power back into the hands of the buyer, if there haven’t been other strong offers.
Public auctions are one of the best, and most transparent, ways to buy because you can see your competition. Unlike private sale, auction sales are unconditional. Once the hammer falls, the property is sold and there is no cooling-off period for the buyer or the seller, which means you need to make sure your finance is approved before bidding.
Make sure your finance is sorted
Cash is king in times of uncertainty so make sure your finance is sorted before you make any offers. “You may have had finance approved a month or so ago but, if your financial position has changed, you might have to go through that process again,” says Nicole. “Lenders want to make sure people have job security and have capacity to pay off the mortgage.”
If you’re looking to get approval, make sure your discretionary spending is tight in the months leading up to the sale. “Be really careful and don’t just take for granted that you’ll have your loan application approved.”
Seek financial advice
On the selling side, Nicole says, be aware of what your motivations are and whether selling is absolutely essential. She also says to consider liquidating other assets, such as a car or boat, first.
“If you’re buying and selling in the same market, it’s still a win,” she says. “But really think about it, and make sure you have an independent financial adviser talk to you about your options.”
Know your why
Nicole says while there are some shifts in the buying process, for the most part it’s no different from normal. “You just have to understand why you’re buying or why you’re selling and ask yourself, ‘Is it because I have to [or] because I want to.”
Don’t be afraid to make an offer
Because of coronavirus fears, many vendors don’t want too many people going through their houses so, if they get a good, solid offer, they might be more inclined to take it rather than risk drawing out the process. “That’s not necessarily a bad thing,” Nicole says. “A good offer is a good offer. Anyone would consider that in any market.”
Questions to ask the selling agent
- How many people am I up against? The agent may not be able to tell you this. If they do, you have to assume they won’t want to jeopardise a campaign by saying they have a higher offer when they don’t. You have to trust that the agent is trying to help you but always remember they’re also trying to get the best possible price for the vendor.
- By what time do I need to submit my offer? Know what time the agent is going to stop accepting offers. You’d hate to miss out by a few minutes. Alternatively, turn the tables on them and put in an offer with a limited timeframe in a bid to encourage the vendor to make a decision.
- What terms are most suitable to the vendor? Arriving on a more convenient settlement date might mean more to the vendor than offering more money.
- What deposit do they want? Usually deposit will need to be 10 per cent but, if you’re buying something at the higher end of the scale, they might accept five per cent.
- Are any professional advocates looking at the property as well? If advocates are on it, you can be sure they will have done groundwork for their client, so you should do your groundwork, too.
- Is there is an offer above mine at the moment? While they may not always be able to answer this, it’s worth asking.
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