Everyone wants to negotiate directly with the Owner. It’s programmed into our Kiwi genes to want to start off low, see what the Vendor comes back with and maybe meet in the middle if it works for us. To buy a home any other way feels like a bit of a let-down: “We never got to show off our sweet negotiating skills!” In this market it feels like you are being pitched against every other buyer with one chance to put in your best offer and no opportunity to negotiate if you fall a bit short.

Sound familiar? Welcome to the world of Auctions, Tenders and Deadline Sales. Often unheard of in overseas markets (like South Africa, USA, and the UK) these are processes that are now used for the majority of property sales in New Zealand’s main Cities (Auckland, Wellington, Christchurch) and they are simply a function of the type of market we are in (ie. a hot market with a big shortage of supply).

If / when the market ever turns to crap (or slows down) you will see a whole heap more properties being marketed with a price. Why? Well when there are 50 x 3 bedroom houses on the market in Newlands you have to be the best priced home to attract what few buyers there are to go around. When there are 5 x 3 bedroom houses on the market in Newlands and 30 – 40 groups at each open home you are going to have competition, and when there is competition the owners want to know they are getting the best possible price, that’s where Auctions and Tenders come in. The New Zealand real estate industry is in my opinion a world leader in this regard, which is often great for sellers if the process is run well but can be tough for buyers.

So, should you just avoid buying a house altogether and wait for the market to tank?

That is one argument – only buy when the market is at it’s worst and there is less competition. The only problem is that you might be waiting a long time. I have been selling in the Northern Suburbs since 2007 and even when the global financial crisis hit (2008 – 2010) we still received multiple offers on our more attractive properties. In a popular area like this, good houses will sell well in any market. So if you want to buy a nice sunny, weatherboard home with good access and indoor / outdoor flow then you will probably have to compete to buy it no matter what sort of market we are in.

How do you approach it then?

“Aaargh I friggin hate Tenders so much!!”

I understand. I bought my first home at a Tender and I remember lying awake at night trying to decide what number to put down, strangely enough that number kept slowly increasing as I got closer to the deadline date, sound familiar?

Step 1.

Remember that buying a house that other people like is a very good idea.

It shows you have good taste and a home that attracts competition now, should also attract competition when you come to sell in 5, 6, 7 years time, especially if it has these fundamentals.

Step 2. 

Consider A ‘great deal’ and a ‘great house’ are almost always mutually exclusive

Buyers want to get the best deal they can, and love any opportunity to negotiate, but the better a home is, the less negotiating leverage buyers will have. Too many buyers pass on a great home because they are not able get the discount they were hoping to get, or because there was too much competition only to end up purchasing an inferior property later.

Step 3.

Find your closest comparable sales.

The agent might give you a ball park price range but are you really going to rely on what they say? What if they are just trying to quote it low to attract interest? What if they quote it too high, you take their advice and end up offering $30k more than you needed to? Or worse still – you don’t offer because you thought it was out of your price range and it ends up selling for less later on!

Ideally I would start looking well before you are ready to buy. Even before you have finished saving a deposit. Look at 10 or more properties that would be in your target price range, guess what they will sell for then find out the actual sale price and see how close you got. If you are about to spend $400k – $500k shouldn’t you do some research first?

Take a moment to consider how much money it is that you are about to spend…. How long would it take you to save that much? It is easy to be flippant when we are spending other people’s money (ie. the bank’s) even if we are committed to repaying it over 30 years.

Always remember this phrase: “Buy with emotion but justify with logic.”

Note: If you come to one of our open homes we will text you the final sale price range once the property has sold.

For specific tips on how to structure your offer read ‘how to win a Tender’ and ‘6 tips to help you decide on a price’

Stay safe out there people!

Best wishes,

Andrew Duncan
Real Estate Blogger

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THOUGHT OF THE WEEK:
“Sometimes we’re all too quick to count down the days that we forget to make the days count”
~ Unknown
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