Buyers, take control to ensure successThe Irish property market has, in the past, suffered from a negative public perception. Most of this stemmed from a chronic lack of transparency coupled with the old style of negotiating that likened it to horse-trading. Prospective home buyers scrambled to learn the so-called ‘tricks of the trade’ before entering the market. Thankfully, the market has evolved in recent years and these changes have strengthened buyers’ hands when it comes to taking part. Tricks, by their very nature, are fleeting illusions. They are not real; therefore any results from trickery are unlikely to be real or of any lasting, material benefit. The good news is that, with a bit of hard work and shoe leather, buyers can ensure a more successful outcome by taking a measured and strategic approach to their house-hunting.
Strategy is hugely important when trying to find your home in an area of low supply and increasing demand. Buyers need to outperform competing buyers but are genuinely unsure as to how they can do that. As the market evolves, so too do our techniques and negotiating strategies. For example, at the depth of the property market crash, when supply was high and buyers were a rarity, the strategies employed were different. In that market, sellers were best advised to pay their estate agent more, not less, so that they would promote that property over another and buyers were advised to pre-negotiate their properties prior to any viewing as there were simply too many houses to view them all. These strategies are still in play in stagnant markets all around the country today, however, for the pockets or mini-markets that have well recovered and are now experiencing a shortage of supply, these require a much different approach by buyers.
Simply put, the best strategy for buyers trying to find their ideal home where supply is low and demand is high, is for buyers to put themselves in the strongest position, they must be the best bidder in every instance. This is not just about bidding the highest price, they may show themselves to be most likely to follow through with the purchase in the quickest timescale. Buyers can do this by being fully prepared and ready to buy as soon as the right opportunity presents itself. Of course, they can always ensure that the opportunity presents itself by following these tips:
1. Have finance in placeThis sounds obvious but we see so many buyers who, upon making the decision to buy, phone their local bank or mortgage broker who tells them loosely, based on information supplied over the course of the telephone conversation “you should be fine, no problem” and this is incorrectly taken to be approval from a lender. This conversation is essentially useless and I would urge buyers to use this particular conversation to disclose the ‘warts and all’ truth of their financial history as there may be earning deficiencies or spending habits – like on-line gambling or late night weekend withdrawals from ATMs outside of nightclubs – that will rule out a mortgage at this time. On the other hand, if everything appears to be in order, then please do make an immediate appointment with the bank or broker to ensure that you have all of the necessary financial documentation to submit a full application and receive written Approval in Principal, or AIP, from at least one lender. When you get AIP, please note that it is for a specified time only and buyers are advised to keep this up-to-date as they may need to produce it, as proof of finance, as the time of making an offer.
If, for whatever reason, you are not in a position to secure a mortgage, ask the broker to help you prepare a three, six or even nine month savings and lifestyle plan so that you can work towards securing a mortgage in the future.
2. Keep a watching brief on your area
This is crucial for any house-hunters, particularly those in areas of high demand. You should know about all potentially suitable houses or apartments on the open market, within your chosen area(s), that suit your requirements. Property sales websites like daft.ie and myhome.ie make this very easy now by allowing you to create and maintain multiple searches that send new properties to the market, which meet your search criteria, directly into your email in box. All you have to do is assess the property in relation to your own criteria. If it stacks up, then do a drive-by viewing to check out the exterior and get a good feel for the immediate neighbourhood. If possible, do this in the evening time to check for parking issues or anti-social behaviour. Also, keep an eye on the price register (www.propertypriceregister.ie) to get a clear sense of the volume and value of transactions in your area.
3. Get all the necessary advice beforehand
Once again, this is something that people tend to do in every other aspect of their lives and particularly with their financial dealings, but strangely, would-be buyers seem to jump straight into house-hunting before getting the necessary advice. Where we see this most is where buyers jump into viewings, and even making offers, without fully understanding their local market and/or their particular housing requirements or, more commonly, where their proposition as buyers (i.e. budget, requirements, readiness) fits into the local marketplace. Usually buyers who do this, experience the frustration of repeated failures within the market and they blame the property market instead of their own lack of preparation. Such mistakes are costly in a rising market as you waste time and will invariably end up paying more at a later date. Mistakes when buying your home are simply too expensive to make, seek advice in advance and get it right first time.
4. Do not start phoning, viewing or making offers until you are ready to go
Following on from the point above, it is wise not to start phoning estate agents and attending viewings until you are ready to buy. There are a number of reasons for this, firstly, you will frustrate yourself and your search so that when you are in a position to buy, you will be ‘property blind’ and far less likely to recognise the right house when you find it; secondly, the estate agents will be much less inclined to rate you as a serious buyer and the label of ‘tyre-kicker’ does not make these agents rush to extend new opportunities – some of which might be off-market; thirdly, any offers you make will need to be higher, in order to compensate for the delay and increased risk; finally, and this possibly the worst effect of house-hunting before you are ready to buy, there is a chance that you will find your ideal home and not be in a position to do anything about it. This is terrible for over-enthusiastic buyers who will invariably compare every other property to their lost opportunity and blame the market for their frustrations before settling on a property that may not be their first choice. This is extremely common in the current market, so buyers, do not make the same mistake. Remember, the opportunity of a lifetime is only good for the lifetime of the opportunity. Do not try to time the market, instead seek out and accept the best opportunity available to you at a time when you are ready to buy.
5. Be straight, be courteous and respect the estate agents time (just remember who pays his fee)
This is really just a quiet word of advice for buyers – be nice to the estate agent. I am not now, nor have I ever been an estate agent, but I am a savvy enough buyer to know that, all things being equal – the estate agent operating in a busy marketplace can pick and chose their buyer. Do not make the mistake of antagonizing him as you will need him to get the deal over the line. The estate agent works for the seller, not the buyer, and as such his role is to get you, the buyer, to learn about the house, fall in love with the house and ultimately to buy the house. If you then want to buy it, you are not at odds, just remember who pays his fee when it comes time to negotiate.
6. If you like the property, don’t be afraid to tell the estate agent
This follows on from the point above about not wasting the agent’s time. The old fashioned practice of walking around the house, stony-faced and making general ‘tut tut’ sounds of disapproval, for the purpose of negotiating a greater discount, is now gone. It is ridiculous, ineffective and bound to antagonise the sellers and their estate agent. Do your research in advance to determine what level of discount is likely and use the viewing as an opportunity to ask as many questions as possible. Remember, the estate agent does not have a duty to disclose but he does have a duty to answer truthfully – it is up to the buyer to ask the right questions. In a competitive market, if you like the property, tell the agent so that they can treat you as a serious contender. When a couple turns up to an open viewing, they will invariably recognise most of the other parties viewing and each will acknowledge the other with a knowing smile that says “yes, we’re still looking…”. There can be a tendency to think of house-hunting as a team sport ‘we are all in this together’ sort of thing but nothing could be further from the truth. The people that you are viewing alongside are, in effect, your competitors. If you want to secure the property, do not play games and do disclose your interest.
7. If you don’t like a house, tell the agent why
It may be an Irish thing, but most home buyers even in the most unsuitable of houses do not seem to be able to say “No, this is not what I am looking for”. By not giving honest feedback on the property, buyers come across as indecisive and not committed and, more importantly, they are missing out on the opportunity to access better properties. For example, a buyer who tells the agent within five minutes of walking into a house that it is not suitable, clearly demonstrates that they know their criteria. The next step is to say why this particular property falls short, is the condition too poor, garden too small or layout unsuitable? If so, by communicating this to the agent at the time of viewing, you are giving the estate agent the opportunity to introduce you to other properties that might be better suited to your requirements. I can guarantee that this will be a much more powerful and effective strategy for serious, ready buyers than just surfing through waves of on-line properties.
8. The time to make a decision is before you sale-agree
This is a big issue at the moment as, anecdotally, fall-through rates in Dublin are increasing once again. It is not sufficient to sale-agree a property merely for the purpose of securing it while you shop around for other opportunities. Although the booking deposit is fully refundable in each and every instance, it should not be the fall back position for unsure buyers. Buyers who engage in this practice repeatedly will soon find themselves closed out of genuine opportunities in the market and may need to buy at auction.
9. Engineers report is not a tool for back-tracking or re-negotiatingIt was once an accepted ‘trick of the trade’ that the engineers survey would be use as leverage to delay a purchase and then hammer a discount from the seller in the 11th hour prior to signing contracts. While this does still happen in stagnant markets, it certainly would not be a wise tactic for buyers in a competitive market to employ. In practice, the engineers report should be used as a potential solution or remedy to a fault that is unexpected and inconsistent with the age of the property. If a defect is uncovered that is inconsistent with the age of the property, then this may well be a reason to re-negotiate or withdraw from the agreement entirely.
10. If your circumstances change, be realistic and adjust your search criteria
The mortgage market is suffering even more than the housing market and while most people tend to lump these in together, they are distinct markets and have distinct, albeit usually similar, trends. At the moment, mortgaged buyers are more vulnerable and they will be treated accordingly at the time of making offers. Routinely, we see mortgage lenders moving the goalposts on buyers – usually by way of changing terms of conditions of lending for example, with budgets, lending limits or levels of renovation that will be acceptable. It is imperative that the buyer stays in contact with the lender, gets AIP updated regularly and seeks clarification before buying at auction or buying a property in need of extensive upgrading. If, as a buyer, you find that your circumstances have changed, do not ignore it – adjust your criteria and start again.