Despite all the good intention, many buyers often make crucial and costly mistakes when buying a property. Based on years of experience as a buyers’ agent on the North Shore, the following are the Top 10 Mistakes that I see property buyers make on a regular basis, irrespective of whether it is a buyers’ or sellers’ market.
1. Not enough research
Buyers need to do their homework. Unless you have physically inspected 50-100 properties in the target area, you will not be able to accurately gauge what is a ‘good price’. Merely browsing through photos and floor plans on the internet is simply not sufficient and cannot compare with a physical walk-through. Likewise, many buyers rely heavily on data and statistics, which tend to be historical in nature. The only way to accurately gauge the market sentiment at any given point in time is to see as many properties and attend as many Auctions as you can. No report you buy can be a substitute for this legwork. Indeed, many of the computer-generated reports you can buy at the click of a mouse are often inaccurate. This is particularly the case for properties where renovations and improvements have not been taken into account or where they have been very few recent comparable sales in the neighbourhood.
2. Too much research
For most people, a property is the single largest purchase and investment they will ever make in their lifetime. So it is understandable that you would want to be as thorough in your research as possible. However, if the research takes too long, you could well miss some really good buying opportunities and end up chasing a market that no longer exists.
3. Spread too thin
It is important to condense the search process to a specific geographical area and time frame. Otherwise you could end up searching across ten different suburbs over a 12 – 18 month period, which would give you neither an accurate nor reliable picture of the market.
4. Lack of confidence
Some buyers are paralysed by the fear of making such a large purchase decision that they end up not being able to commit to any property. For most buyers, there is also an element of ‘fear of missing out’, which is driven by the fear that something better may be out there. This fear of making a mistake is a reflection of a lack of confidence, and renders buyers unable to analyse all the information they have gathered in a decisive manner.
5. Not seeing the big picture
With more and more properties being styled for sale, it is easy to fall for the presentation rather than the product being sold. Buyers need to pay attention to details and focus on the important but less glamorous things such as where the sewer is located, whether there are any easements, whether the property is in bushfire-prone land (which is not uncommon in the leafy North Shore area), the zoning of the property, whether there are any planned developments in the area, etc. Likewise, many buyers get fixated on small issues that are easily fixed instead of looking at the big picture. Focus on the things which cannot be changed (such as the location, position, aspect, etc.) and not on cosmetic flaws (such as an old kitchen or bathroom).
6. Comparing apples with oranges
No two properties are ever alike. At the most basic level, property value is determined by the size of the property (land size and number of bedrooms, etc.) But beyond this, there are so many variables that can even cause two properties with same land size on the same street to vary greatly in price. For example, even-numbered houses on one particular street may be worth more than similar houses on the same street that are odd-numbered. The reason could be that one side of the street may be the high side or may fall into a highly sought-after school catchment. One side of the street may have the highly desired north-facing backyards whereas the houses on the opposite side have south-facing backyards. Or one side may be in bushfire-prone land but the other side is not.
Since most buyers cast a wide net when searching for their dream property, many do end up making the mistake of comparing apples with oranges. This typically happens when buyers compare properties in adjacent or neighbouring suburbs without taking into proper account the subtle differences in demand vs. supply, capital growth and rental potential etc.
7. Not having a good auction strategy
It is always surprising how many buyers show up to an auction with either poor or no strategy at all. Just knowing what your maximum limit is going to be is not sufficient as a strategy. Among others, you will need to have a strategy for dealing with other bidders, the auctioneer, as well as the selling agent who will no doubt be there to put the pressure on. There is no single ‘ideal’ auction strategy. Every auction is different and requires a different approach depending on who the players are on the day and whether the auction will be in-room or on-site. Buyers should not be bidding at an auction unless they have attended and watched at least 15-20 other auctions (both in-room and on-site) to see the myriad of ways it can unfold.
8. Overly focused on getting a bargain
It is always better to pay a fair price for a premium property than to get a bargain for a sub-par property. In the current seller’s market, too many buyers are focused on getting a bargain rather than on securing the best property possible within their budget. It is not uncommon for a buyers’ ego to get in the way of securing a great property! Holding out on that $5,000 to $10,000 may end up costing you a terrific property that will generate much more return in the long run than any savings you might make in the purchase price.
9. Not asking for help
The most dangerous property buyers are the ones who think they know it all and do not seek appropriate advice. An example would be bidding at an auction. One single mis-bid could cost you much more than the fee to hire a professional to bid on your behalf.
10. Herd mentality
Property buyers are generally cautious about acting when no one else is. At auctions, there is often silence as the auctioneer tries to coax the first bid. It is only when others start bidding that some buyers feel confident enough to join in. Likewise, many buyers are hesitant to submit offers until the selling agent puts the pressure on by saying that there are other interested parties. Savvy buyers are accurately educated, confident, decisive, able to see the big picture and do not subscribe to the herd mentality which is holding back many buyers.
About Oliver Stier
Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation.