In my last opinion piece for REDnews I outlined the tips I’d picked up in my first home buyer journey.
Little did I know that one month after writing the article, I would finally purchase my first home – after five unsuccessful attempts spanning a year.
Now, I’m sharing the tips I’ve picked up from purchasing in a buyer’s market – where you might just be able to negotiate your way into your dream home like I did.
Take things slowly
Now that the property tables have turned and we’re experiencing a buyer’s market, the whole process has slowed down.
By May 2022 it was well and truly a buyer’s market and even though I did attend the very first open home of the property I ended up buying, I took my time to decide if this was the right place for me.
When the real estate agent phoned me on the Monday after to see what I thought of the property, I told him it was a lovely place, but seeing as it was being sold at auction, I would wait to see if it doesn’t sell – and if it doesn’t, I’d take another look.
It wasn’t until the following week that I realised how much I really did love the place and decided to schedule a private viewing to see it again.
I went back to the Central Auckland unit three times. Once on a very sunny afternoon, once on a rainy morning and once more at night to make sure I had seen it at different times of the day and in different weather conditions. I also explored the neighbourhood and local cafes to see if this was the location where I wanted to live.
The more I saw the place, the more I loved it and decided to register for auction.
Despite swearing off auctions after my last experience left me in tears, I decided to give it another go.
After all, the market had changed, there were less cash-buyers to compete with and I had gotten my emotions under control to go back in with a relaxed attitude.
Don’t go to auction expecting a total bargain
Even though we’re currently in a buyer’s market and auction clearance rates in Auckland have fallen to 18%, that doesn’t mean you’ll get a total bargain.
Yes, prices have softened, and you can expect to pay less than you would have at the peak of the market in late 2021, but that just means you can get a good deal – not a dirt-cheap price.
Just to re-cap – my goal was to find a two-bedroom unit or townhouse within a Central Auckland suburb, preferably with a car park and a living area with enough space to fit both a sofa and a dining table. My ideal place would also have a nice outlook and tranquil vibe.
In 2021 every place that ticked all those boxes ultimately sold for more than I offered because competition was fierce.
In today’s market it meant that my top budget could finally secure the home I wanted – but I was still prepared to pay my top dollar for it.
My strategy was to start high and bid fast
I registered for auction and completed my due diligence in the second week the property had been on the market and at that time I was the only registered bidder.
I did think perhaps no one else would show up but was prepared for some competition and stayed realistic that this may or may not become my home.
A week later when it was time for the auction there were three other registered bidders.
Because of the slight fall in house prices we’ve already experienced (around 5%) and constant media coverage forecasting up to 15% drops, I thought some (or all) of these bidders might have registered with the expectation of fetching a total bargain.
And I was still prepared to go to the very top of my budget.
I decided to start the bidding off high and two of the registered bidders didn’t make a single bid.
The one other bidder took so long to call out his counter bid that I didn’t think he was going to call one, but he did. Within a second, I called out an extra $25,000. He took his time again but finally made one last bid. Within a second I out bid him again by another $25,000 and he was out.
I followed the strategy that quickly bidding in large increments and bidding fast can psych out your opponent.
And as one real estate agent said to me: “An auction is psychological warfare, like a game of poker.”
The room went silent and there were no other bids. The auction was paused. I was then able to negotiate separately with the vendors.
I was able to negotiate the sale price slightly below what the vendors wanted but they were still happy with it, as am I with the purchase price. The final price ended up being just below the 2021 capital valuation - which is definitely less than what it would have sold for in the peak of the boom last year.
From my experience, if you’re prepared to pay a fair price for a property, without expecting a bargain, it’s a great time to negotiate a deal.
Now is as good a time as any
I know that some first home buyers who have suffered multiple losses can be drawn into purchasing a property that doesn’t tick all their boxes, just to secure a home.
I decided not to go down that path and now I’m glad I waited. Markets can change overnight and what might not have been possible during a boom time, could become within your reach several months later.
And if you can buy a property just below the recent capital valuation, you’ve already potentially made some gains at the time of purchase.
In my first opinion piece in this series, I quoted author Joyce Meyer, who said: “Patience is not the ability to wait, but the ability to keep a good attitude while waiting.”
The key part of my first home buyer journey has been learning patience and keeping my attitude in check.
Don’t pin your emotions on buying or not buying a property, and take the whole process slowly.
My new home has ended up being better than what I expected to buy, and in a much better location than any of the other properties I failed to buy last year.
None of us know when the market will bottom out or when the next boom will be, so from my experience, now is as good a time as any to buy.