When you’re buying property in Melbourne you may find yourself missing out on houses. You attend open houses and auctions week after week, only to be pipped at the post by competitors with deeper pockets. Your frustration builds and you start to worry that you’ll never get a foot in the property market.
What can you do? Today, I’m sharing the common struggles people face and how to deal with the frustration.
Property FOMO is real
As a buyers advocate, I see it all the time. At the start of your property search, everything is exciting. You’ve calculated your budget, decided what kind of property you’d like to buy and which suburbs you’d like to call home. The first few open homes are exciting. Naturally, you can’t resist wondering where you’ll put your couch and if the fridge will fit in the kitchen space.
Fast forward a month or so. Now your spirits are lagging. Prices are soaring and you’re missing out on houses at auction. Perhaps you’ve told all your friends you’ll be bidding at the weekend. So you didn’t enjoy confessing on Monday that you missed out. You’re getting tired of people asking how the property search is going. Not to mention hearing anecdotes about people who couldn’t find properties for years. You’re getting unwanted advice about investing from everyone and buyer fatigue is setting in.
You just want to buy a house! It’s a very common frustration for people buying property in Melbourne. Missing out on houses month after month, auction after auction is not fun.
When you get frustrated, you become vulnerable
Agents can see you coming a mile away. They know your price point, because they’ve seen what point you dropped out at auction. The telltale signs of your frustration are showing. So they might capitalise on your disappointment. They’ll offer you a house that doesn’t quite meet your criteria. They suspect you’re ready to compromise. This could be by:
- increasing your budget — stretching it to the limit, or perhaps exceeding it (more on this later)
- changing your criteria — forgoing that extra bedroom or study you initially wanted
- reconsidering properties you would have avoided at the onset
- changing your view on renovating — or the level of renovation you’re willing to undergo
- extending your search area to include new suburbs
It’s this changing approach that brings you closer to your biggest risk — buying an unsuitable property. Suddenly, you are considering the south-facing house with the bad floorplan, or buying a townhouse off the plan when you originally decided a house with a large backyard was best.
It seems like a tall story, but many buyers wind up purchasing a property they regret simply out of frustration. Because they let the emotional toll of missing out on houses get the better of them. Agents can capitalise on this, especially if you’re the underbidder at auction. They know you are vulnerable. So they use this to get rid of homes they’re struggling to sell.
The media plays a part too
Journalists love to report on booming house prices (or the opposite). It’s just the right kind of dramatic story that gets more clicks and views on content. When you are buying property in Melbourne, it’s easy to be swayed by news coverage and TV bulletins declaring a boom. But media reports tend to exacerbate market pressures. Sensational headlines can impact buyer sentiment. Buyers might decide to buy now before prices hit another threshold. All this pressure and speculation contributes to you missing out on houses at auctions, yet again. Don’t allow misleading or dramatic media reports to influence your buying strategy.
The art of the wise compromise
When you are constantly missing out at auction, you do need to revisit your wish list. Sadly, you do need to start compromising. The key is making sensible choices. It’s far better to compromise on a kitchen that will cost you an additional $30,000, than a dodgy extension that will cost you $130,000.
The key is to compromise on things you can fix, rather than what you can’t.
For example, you can never correct a south-facing orientation; it will always be dark. A bad layout can be fixed, but is likely to cost you in the hundreds of thousands. On the other hand, adding a new bathroom and kitchen is entirely possible. Perhaps you can live in the home in its current state for a year or two until you save the funds.
Reconsider how willing you are to renovate. Buying a fixer upper may not have been your intention, but can help get you on the property ladder. It can be an opportunity to add value to the home rather than competing in an emotional frenzy for a home where that added value is going to the vendor.
My golden rule is consider the compromises you made when you purchased will also be what buyers will make when you sell. The train line, poor aspect or power lines may not put you off because you’re desperate to buy. But in five years’ time, perhaps in a slow market, you may struggle to sell.
Stretching your budget
This is very common. We see in these markets buyers are reaching the tipping point of their budget, and taking a financial risk. You may be confident you will increase your income in years to come, thus being able to manage repayments. But 2020 has taught us that life can throw unexpected surprises. A rise in interest rates isn’t on the cards this year but perhaps in the future you’ll be under pressure. Interest rates at 2% is a great time to secure a mortgage. But in reality, over the life of your 20 or 30 year loan, it is more likely to average 5-6%. So be very cautious about the level of financial risk you take on. I’ve seen people selling their dream home because they overextended themselves financially, and it can be disastrous.
Creating a new strategy
A buyers advocate will create a new buying plan based on the current market conditions. The Melbourne property market is unpredictable, especially in the post-covid climate. A good advocate will help you make those wise compromises, assess your budget and help you create a new plan that realistically evaluates your price expectations.
Knowing when to wait
You may be wondering if it’s better to wait for the market to cool off. We get asked this all the time. The answer is, it depends. Sometimes, the search for a home can be so disappointing. Family time suffers and your private weekends are spent rushing to inspections and auctions. This can take a toll on some buyers.
Sometimes taking a step back for few weeks may be for the best. Keep an eye out for what is coming up but be strategic about what you actually inspect. Many buyers don’t want to miss out on finding their dream home during a break.
Generally, if you are going to press pause, keep an eye on the market at the same time. Even a week or two of skipping open houses can give you the rest you need. Meanwhile, keep an eye on listings and know your data for the suburbs you’re targeting. This means that when you are ready to step back in, you’re up to date with the latest numbers. If you don’t keep track of sales data, you can be at risk of buying an overpriced property should the market demand start to ease.
Don’t compare to other buyers
It’s natural to keep an eye on who’s looking at the home during inspections. Don’t worry if they look rich or drive a fancy car. Other buyers may seem really interested because they’ve brought their mother. Especially if they are measuring the kitchen to see if their fridge will fit. Some buyers spend more time looking at the competition than the property they’re inspecting. Don’t let anyone put you off.
Focus on assessing the property against your new criteria. Markets are cyclical and demand peaks and falls. With a bit of patience and a sensible strategy, you will hopefully soon grab the keys to the right home.
To recap, if you’re missing out on houses, consider:
- don’t overextend your budget
- regroup and take a step back from looking at every single property
- revisit your buying plan
- decide what you’re willing to compromise on
- consider bridesmaids suburbs
- reconsider your willingness to renovate
- don’t let frustration guide you to buy the wrong house
If you need help formulating a buying strategy because you keep missing out at auctions, a buyers’ advocate can help. Contact us for a free one hour consultation.