Homebuyer FAQs: should I buy or sell first? How do I compete at auction?

Should I buy or sell first? When’s a good time to buy? What’s a good property to purchase? How do I buy at auction? Experts answer these questions – and more.

A question property professionals are regularly asked is: how do I buy at auction? Pictured: Hocking Stuart Auctioneer Eric Bartz. Picture: Nicki Connolly

A home will be the biggest purchase of many people’s lives.

So it’s no surprise this momentous endeavour will trigger a flood of questions.

Five property professionals have shared the questions they are most asked about the buying process, and then answered them.

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SHOULD I BUY OR SELL FIRST?

Property Mavens director Miriam Sandkuhler (MS):It’s usually best to sell first so you know what your financial position will be before you bid on a home. But in a surging market, it can make sense to buy first so you can catch the upswing when you sell. There’s risk both ways. And it depends on your property – if you buy first and you have a C-grade property, you could struggle to sell and have to find bridging finance. If you sell first, make sure you have your buying strategy in place (so you can) hit the ground running.

Property Mavens director Miriam Sandkuhler says buying first may make the most sense in the rising market. Picture: Beth Jennings

Oasis Skeen buyers agent Dan Grantham (DG): In the current market, it is prudent to be buying first. Or if you are keen to sell first, have three to six-month settlement terms. Stock is low, so you need more time up your sleeve.

Stockdale & Leggo chief executive Charlotte Pascoe (CP): Your financial situation and the market will play a large part in dictating how best to go about this. If the market is slow and it may take some time to sell your property, you might be best to sell first then buy knowing what you will have to spend, and to avoid being stuck with two mortgages. But in this market, finding a home to buy is the challenge, as there is little to choose from and a lot of buyers looking.

WHAT’S A GOOD PROPERTY TO BUY?

MS: In Melbourne, the best-placed properties are three-bedroom houses on blocks of 500sq m or more, which cater for work from home in a light-filled room. Suburbs no more than 25km from the city on the east and southeast, or 10km on the north and west side, are likely to perform best. Look for the price bracket where investors and most home buyers meet – currently $650,000-$1.1m. Also likely to do well are 20th-cenutry apartments and townhouses with an outdoor space, a car space and good amenity.

DG: One that is strategically located, has growth prospects, is close to amenities and infrastructure projects, in a family friendly area.

CP: Are you looking for capital growth? Are you wanting an investment property? First home? Get your checklist right, take your time weighing up what you want in the property, then start the hunt.

Dan Grantham, buyer's agent at Oasis Skeen Property, says your target property should be strategically located and have capital growth prospects.

WHAT PROPERTIES SHOULD I AVOID?

MS: High-density units, B-grade houses, and homes in the outer suburbs. And while regional markets in Victoria’s major centres such as Ballarat and Geelong will continue to do well, smaller towns will see their recent outperformance start to flatten.

SHOULD I BUY OFF THE PLAN?

MS: No. Newly built units tend to be overpriced, and many come with building and teething issues. Target established property if you’re an investor or an ambitious homebuyer.

SHOULD I BUY A HOUSE AND LAND PACKAGE?

MS: If a newly built house is the only option that suits your lifestyle and budget, go ahead. The problem with buying in new estates is all the other houses being developed in the surrounding area are likely competitors on the resale market. The turnover is much higher than in inner-urban areas. This creates a continual supply of houses for sale, which constrains capital growth.

Stockdale & Leggo chief executive Charlotte Pascoe says while 10 per cent is the rule of thumb for deposits, some vendors may accept less.

HOW MUCH OF A DEPOSIT SHOULD I HAVE?

CP: As a general rule, 10 per cent. But some owners will accept less and others will want more. A bank will also state what funds are to be contributed to the mortgage, so you will need to speak to the bank first and understand the terms of the loan, then ask the agent about the owner’s expectations. You will avoid paying lender’s mortgage insurance with a 20 per cent deposit.

WHAT IS PRE-APPROVAL?

CP: A bank has given you a formal approval to spend up to a certain amount on a property. This approval will be subject to a valuation once the property has been purchased.

IS THE QUOTED PRICE ACCURATE?

Advantage Property Consulting director Frank Valentic (FV): At the moment, in most price points, properties are selling $100,000-$200,000 above the top of the range. That’s just where the competition is taking us. The reserve is set and it’s generally not that the agents have underquoted it, just the competition driving up the price.

Frank Valentic says competition is driving up prices at most levels of the market.

WHAT CAN I DO IF I FEEL A PROPERTY ISN’T QUOTED FAIRLY?

DG: Ask the agent for three recent comparable sales, do research on similar properties, or ask another local agent – chances are they know the property or can give you further information.

HOW DO I BUY AT AUCTION?

CP: Have your finances in order and consider doing a building and pest inspection prior. You can’t change your mind later as there is no cooling-off period, so you need to know you are set to go with a clear budget in mind. With online auctions, you need to understand the platform the agent uses and how to be in the race for the property.

DG: Write down an upper limit and put it in your pocket – this will keep you accountable. Then at the auction, position yourself at the back of the room and remember, body language never lies. Dictate the pace (of bidding), use emotions of others to your advantage and be aware of your competition.

CAN I MAKE AN OFFER BEFORE AUCTION?

Barry Plant executive director Mike McCarthy (MM): Yes. (Whether your offer will be accepted) depends a lot on the market. We’re in a seller’s market now, there’s not a lot of supply, so you’re not going to get a bargain. It has to be a strong offer.

You can test the waters – put an offer in that is below what you’re prepared to spend but is still substantial. The agent might come back and say no. So work up a stronger offer based on what other properties are selling for and what you saw at other auctions over the last month or so. Get your ducks in a row by having your finance ready and a building inspection done.

Barry Plant Group chief executive Mike McCarthy says buyers planning on making a pre-auction offer needed to have their “ducks in a row”.

HOW DO I PUT IN AN OFFER?

DG: Put an offer in formally, in writing, for transparency. Formal offers are taken more seriously.

CAN I NEGOTIATE ON SETTLEMENT, DEPOSIT SIZE?

MM: Yes, particularly if you have a strong, unconditional offer. Don’t feel like you’re locked into a 30, 60 or 90-day settlement and don’t be afraid to ask for a longer settlement – it may be something the seller is happy to go with. (Same goes for) a lower deposit. If you have a strong offer and you’re in a strong position but need a lower deposit, it’s not unreasonable.

HOW DO I FIND PROPERTIES OFF MARKET?

FV: People missing out at a lot of auctions say, “how do we get into this market? It’s too hot.” We (buyer’s advocates) talk to them about off-market opportunities, (which we secure via) relationships we have within the industry.

Unfortunately for budding buyers, the best time to buy was “12 months ago”. Or perhaps three years ago, like Jordon and Lara Brosnan in Patterson Lakes home. Picture: Wayne Taylor

SHOULD I BUY NOW OR WAIT?

FV: It’s still a good time to buy. That median house price is never going back to $120,000 or $700,000, it’s really about focusing on the future. My advice is generally it would have been great to buy 12 months ago. But that’s no longer possible, so now is the next best time. If you can get in sooner rather than later, hopefully you’ll look back in 12 months’ time (and be happy). Ultimately, it doesn’t matter when you get in the market if you hold the property five or 10 years.

IS THE MARKET OVERVALUED? WILL IT DIVE?

MS: Unlikely. While it waxes and wanes, residential property is the best performing asset class with the least risk. Governments step in if the market is suffering headwinds, averting a fall. The fundamentals – interest rates, economy, employment – are largely positive. I’ve heard predictions of a crash every year I’ve been in property. As long as you buy investment-grade property, you will do well over time.

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Originally published as Homebuyer FAQs: should I buy or sell first? How do I compete at auction?