House buying in a buyer’s market: everything you need to know
At long last, you’re ready to buy a house and there are good signs everywhere. It wasn’t too long ago that Canterbury, along with the rest of New Zealand, was a seller’s market with growing prices and buyers always having to save more for a deposit and fighting hard to get on the housing ladder.
We now have a breather from this with the market changing to favour buyers where there are far more houses to choose from, as well as sellers who are more likely to be open to negotiating a deal.
These are good circumstances for you as a buyer, but there are still a lot of things you need to know before making your final decision.
What is a buyer’s market vs a seller’s market?
A buyer’s market—also known as a soft market—occurs when supply far exceeds demand. For Canterbury’s real estate market, including Christchurch, the surplus has left hundreds of houses unoccupied. This is a somewhat unusual situation and a result of a lot of building after the earthquakes.
It’s called a buyer’s market because it is the buyers who have the edge when it comes to price negotiations.
In a buyer’s market, houses tend to stay for sale longer, they may even be vacant for a period of time, especially new-builds, and they often sell at lower prices than they were first listed for. Sellers will often be more flexible about the price they will accept because they want to sell, so they can buy another house and move on. The more pressure they have to move, the more flexible they will be to attract prospective buyers.
All these qualities are in stark contrast to characteristics of a seller’s market, when demand outweighs supply. Here, it is the sellers who get the better end of the deal due to the fact that the short supply of houses means more buyers are interested in a single property. They try to outbid each other to get the house, which results in higher prices.
Recommendations for buying a home in a buyer’s market
There’s no denying that the buyer’s market represents a great opportunity, especially for first home buyers, but there are still plenty of things to understand and consider. So, if buying a house is top of mind right now, here are some pointers to make sure you get off to a good start.
1. Develop a plan and get some professional advice
Buying a house is a big decision and comes with some significant financial and legal implications.
So your first step should be to plan the process and ask these questions:
- What’s your timeframe or what is the date by which you would like to be in your new home?
- How much can you afford?
- What would be an ideal area to live in?
- What is your longer term plan for your second or third house?
While you could listen to the guidance of friends and family because many of them would have bought property in the past, the best people to talk to will be those who deal with property professionally all the time.
Among these professionals are independent mortgage brokers whose job is to find the best interest rates possible and help make the home loan and home buying process as smooth as possible.
2. Remember you have more time in a buyer’s market
A higher number of houses on the market not only provides you with a wide variety of options, but more time to research and then choose. This means there is less rush and pressure on buyers to make snap decisions.
Take advantage of this available time by making the right preparations. Do your homework and study the market. Learn about current house prices and know what is considered expensive and what is considered a good deal so that you have a baseline.
Having said this, be aware if you find a great house you may need to act quickly to avoid disappointment so use this extra time wisely.
3. You also have more time to learn about the buying process
A slower real estate market also gives you the chance to learn more about the different ways to buy a home including at auction, as a negotiation, a tender or as a fixed price. Attending an auction to see how it works, putting in a low offer on a house to learn about the process or even starting to discuss prices, is all good experience. But before you do this, talk about it with your advisor to make sure you avoid entering any formal negotiations!
In a buyer’s market there’s plenty of opportunity to do this when there are more houses for sale. It’s a good time to hone your skills.
4. Be on the lookout for the right sellers
The reference to “right sellers” simply means those who are keen to negotiate with you, which will result in a better deal for you. The keener they are to do this, the better it is for you.
If you’re unsure how to spot an enthusiastic seller, here are a few pointers:
The house has been listed for over six weeks without a buyer
The house was originally listed as an auction or negotiation and now has a fixed price - this means they’ve tried to sell using one method and are now trying something else
The listed price has gone down
The owner is planning to move out of the country, so they want to sell the house as quickly as possible
The seller is willing to throw in some additions if you buy the house, such as covering for certain costs that are incurred in the sales process
The house you are looking at is in an area where there are many other houses on the market, which simply means there’s more competition
In a buyer’s market, there will be more of these types of sellers, so just be patient when looking for them.
5. Know when to walk away
Yes, buying a house is easier and most probably better value during a buyer’s market, but that doesn’t mean you have to agree to the first deal. Remember, you have negotiating power and you are in the driver’s seat, so you can afford to be choosy when it comes to sellers you talk to as well as the house that you want.
If you feel you’re not being given the best deal push harder but if it doesn’t move and it doesn’t feel right, move on and look at the next batch of sellers and houses on your list.
In many cases, walking away from a deal may not be the end of the sale, with a vendor always having the option to come back for further discussions.
6. Why use a mortgage broker?
When prices are under pressure and homes are sitting on the market for longer despite their owners efforts to sell, mortgage brokers are just as motivated to help you achieve the home you desire.
It’s a mortgage broker’s job to ease the process, help you the buyer as much as possible and support you to find the best deal while the market is in your favour. Make sure you talk to one who is independent, that is one who is not linked to a bank or a real estate company - this means they will help you find the best finance support from a choice of lenders, and at the best rate.
House buying is an adventure and while exciting, you need to be prepared for some ups and downs. Having support so you can celebrate the wins, and get through the disappointments, is really important.
At Taurus we love nothing more than helping people to get the keys to their front door. So why not give us a call and we will buy you a coffee so we can talk about your home buying plans.
Mobile: 027 352 6262
Phone: 03 366 6087
Posted 1 Feb 2018