In this Buyer’s Market climate, our auction clearances are lower, days on market are extended, vendors are often applying discounts to their asking price, and it’s not uncommon for agents to lose their listings to opposition agents.
It’s a different dynamic in contrast to the heady days of 2017.
Back in the days of Seller’s Market, our buyers understood the logic behind moving swiftly. We could prioritise our due diligence, arrange a contract review and secure building inspector for a same-day purchase. Putting a date stamp on the contract (ie. documenting that the offer would expire by 6pm, for example) was a standard manoeuvre in an effort to block out other buyers and apply pressure to a vendor and agent who could be swayed by competing buyers to hold out for a stronger offer the next day.
Seller’s Markets can feel brutal for buyers, and pressuring an agent for an answer on an offer was our standard practice for two reasons;
- what a vendor could think was a good offer on Friday may have become a less-appealing offer on Saturday when another buyer made a higher offer
- the buyer needed to either purchase, or accept defeat and be able to move on to the next option, because in a moving market it could feel as though property values were increasing week by week
Yet in this Buyer’s Market, these two points aren’t as relevant. Certainly, it’s still possible for a competing buyer to pip a current offer, and likewise it is possible that we could be in the early stages of market recovery, but there are more dominating factors at play for buyers to be aware of now.
Firstly, vendors in the Melbourne and Sydney markets (particularly those who are selling property in the $1M+ range), are likely to be selling because they need to, not because they are open to offers and wondering what their property could fetch.
This isn’t a marketplace for testing a sale.
These vendors are otherwise known as motivated vendors, and they not only want their property to be sold, but are often aiming for a specific date for the settlement and in many cases, require a minimum sell-price in order to move forward with their subsequent plans.
The threat of a vendor playing games, or being half-hearted about whether to sell or hold is far lower in a Buyer’s Market. This is compounded further by the Selling Agent’s commitment to the sale campaign. Unlike the Seller’s Market we experienced, where auction clearance rates indicated that most campaigns were successful at auction day, Agents now can’t anticipate that every campaign they work hard on will convert to a sale (and in turn, a sales commission payment).
Agents are now working hard for less guarantee of income.
The hurt that is felt by an Agent is palpable when a vendor transfers their campaign over to another agency after their former Agent’s efforts haven’t translated to a sale. This is usually after months of hard work, difficult conversations with their clients, relentless chasing of buyers, and heartache shared for their vendors. It is quite soul-destroying, and it’s little wonder that we have quite a few Agents leaving the industry right now.
It is fair to say that Agent behaviour in this market is quite different to what it was two years ago, and adaptability for Agents is very important. A good Agent will be less inclined to laugh at a low offer or brush it aside in this climate. They will opt to work on it with the buyer and find a middle ground for both parties to the sale.
With cashed-up buyers thinner on the ground, the threat of ‘losing’ a buyer is a higher fear now, for vendors and Agents, alike.
There is considerable talk in the media about suburbs that buyers who were once precluded from entering becoming more affordable. Prices have fallen for some segments of the market and plenty of buyers are now stretching themselves to enter into markets that were not feasible options for them a year ago. Agents are not only grappling with some bargain-hunters, but they are also fielding offers from buyers who are pursuing these aspirational suburbs and are at their financial limit.
While the buyer may be keen, and the offer genuine, the price is well-below the vendor’s expectation.
In circumstances like this Agents need time.
They need to be confident that they have a firm grip on the buyer’s walk-away price. They need to be certain that they have exhausted all options and permutations that the buyer can meet in relation to settlement dates, terms, deposits, and conditions. They need time to talk to the vendor carefully and respectfully. The vendor needs time to consider their options. The Agent often needs time to demonstrate to the vendor that they are really trying to optimise the offer.
None of this can happen in a same-day sale. In fact, quite the opposite.
Time stamping a low offer and expecting an agent to weave their magic is foolish for any buyer unless they have other evidence to suggest that a time-stamped offer will go their way.
The risk for the Agent is that they’ll completely offend and alienate their vendor. This could lose them their trust, and possibly their listing. One risk for the buyer is that their hard time-pressure offer could offend the vendors so badly that despite their motivation to sell, the vendor is reluctant to do business with them. Another risk is that the agent could find another buyer with a slightly more reasonable offer, (or softer approach) and the property could be sold promptly to the competing buyer.
We can all imagine the sound of a vendor saying to their Agent, “Just sell it to these other guys. I’d rather them have it.”
Just this week we experienced two interesting examples of purchases requiring patience and understanding. Both were beautiful homes and each were very special to our respective clients.
Both had been on the market for a while, and both sets of vendors had experienced significant discounting over the duration of their long campaigns.
The offer on the South/East suburbs property was made almost a month ago. The vendor was reluctant to accept the offer back then, and our window of opportunity before our purchaser travelled overseas for work was looming. Three days after submitting the offer, I had the conversation with the purchaser who, by this time was feeling a bit agitated by the delay. The vendors needed time, and while I don’t like leaving an offer on the table for other buyers to challenge, I was confident that with Easter approaching and school holidays taking grip, the likelihood of a challenger was low.
So I suggested we leave the offer on the table and tell the Accounts Department to retain the deposit monies in trust.
At times, the potential for a successful purchase felt precarious, but eventually we received a signed and executed contract. The decision would have been difficult for the vendor, but in the face of the market adjustment (and by giving them time), they could work through their options and make a decision to move on.
The second purchaser had a slightly different experience. They were acutely aware that the gap between their maximum budget and the vendor’s desired price was wide. They didn’t enter into the contract process with high hopes, but certainly approached it in good faith. Interestingly another buyer had been dealing with the Agents from the start of the campaign and had created frustration and upset along the way.
Our buyers were the buyers who appealed to the vendors. It was our offer that the vendor said, “Sell it to them. I’d prefer them to have it” to.
In a Buyer’s Market, particularly when the discrepancy between asking price and selling price can be large, it is important for buyers to try to place themselves in the shoes of the Agent and the vendor. If they can glean any insight into the challenges each are facing, it may help them to frame their offer optimally, apply the right tactics and allow the appropriate amount of time.
Being patient is important. Knowing when to be patient is crucial.