Buying a home? How to make a buyer’s market work for you

Residz Team 6/27/2022 3:36:23 AM 4 min read

buyer's market

phrase of buyer
1. an economic situation in which goods or shares are plentiful and buyers can keep prices down. (Source: Lexico)

If you’re buying or selling a home, you’ll be alive to any talk of a “buyer’s market” or a “seller’s market.” These terms signal which of the two parties (the property owner or the potential buyer) currently hold the greater power in most negotiations.

Right now, much of Australia is heading into a buyer’s market in property. Even in the most popular and most populous capital cities there are pockets where interested buyers are getting thin on the ground but there are plenty of homes for sale. Buyers don’t have to settle for what is available, so increasingly they are arming themselves with the right property data before choosing their new home.

Here we show you the quickest, free way to do that, plus other factors to consider in a buyer’s market.

What causes a buyer’s market?

A buyer’s market results when there are fewer people looking for homes than there are homes on the market. This might be because of a drop in consumer confidence, slowing or uncertain economic conditions, a reaction to rising interest rates, volatile world events, and plentiful but severely unaffordable housing stock.

As is happening currently, a buyer’s market may follow closely on the tail of a seller’s market, as late-to-the-party home sellers scramble to get a slice of the record prices enjoyed by their vendor neighbours. As housing supply lifts it creates competition, and the power shifts to the buyers.

Signs of a buyer’s market

Apart from the media headlines and chat in the line at your favourite cafe, you’ll know a buyer’s market is imminent when:

You notice more homes for sale than usual in your chosen area.
You read of low auction clearance rates. A robust property market has auction clearance rates of at least 70 – 75%. Low auction clearance rates sit at 40% or under. Right now, Australia’s national auction clearance rate is about 57%. In early 2021 they were over 80%.
You observe more vendors are putting a sale price on their home, rather than going to auction.
You get a sense more vendors are prepared to negotiate.
You see properties for sale are remaining on the market for longer. (List based on info from Element Finance).

How trust changes in a buyer’s market

Oh, how times have changed. Remember back to the height of the pandemic when many properties sold prior to auction as buyers desperately tried to secure a home ahead of the competition? Buyers had to move so quickly they placed almost blind trust in their agents, the real estate ads, and video tours.

Even so, a 2021 survey by Indian fintech Basic Home loan found only 16% of respondents trusted a real estate broker to “get the best deal on a house” for them.

Now smart buyers can make use of all this extra time to do due diligence, and don’t have to rely only on what the seller or agents tell them.

Due diligence tips for buyers

Your role as a clever home buyer is to find the best property available that suits both your budget and your lifestyle. Bonus points if you can get that property at a cut-down price.

To find the right property you will want to:

Contrast and compare. To ensure you don’t overpay in a buyer’s market you need to cast a wide net to capture as many options as possible. With time on your side you can research a variety of homes for sale. There is power in being informed about what is out there.
Download a free property report. For every property you’ve shortlisted, download Residz’s free property report. 12 million homes are on the database and in an instant you will be armed with valuable information such as neighbourhood information, investability scores, land size, crime trends, bushfire risk, local schools, development applications.
Ask for the contract on shortlisted properties. The real estate agent will have the ‘contract of sale’ with attached documents showing title search, restrictions on the land, any easements and covenants, council zoning certificate, plus a lot more. If you’re serious about the property, you must show it to your solicitor or conveyancer.
Get a home inspection. One company, Australian Home Inspections, says it has seen in homes built 13-17 years ago an increasing number of ceilings that could suddenly fail, and more generally its inspectors have found improper roof tie downs, water leaks, crooked walls and ceilings, and non-compliant pools.
Ask about the vendor’s reason for sale, and time on the market. You may get vague answers but it’s worth trying to understand how open to offers the vendors will be.
Get pre-approval for finance. Vendors in a buyer’s market are more open to negotiate, and when you are serious about a shortlisted property, pre-approval gives you yet another point of leverage.
Learn negotiation skills. YOU have the upper hand in a buyer’s market, so this is the time to learn how an expert negotiator buys her home.
Be prepared to walk away. A buyer’s market is the time to be picky. You don’t want to buy a home that turns out to be worth less than what you borrowed to purchase it. Most lenders will do an appraisal to ensure this doesn’t happen, but a buyer’s market means there is always another crop of homes to inspect if the current ones don’t pass the test.

Residz is a fully-independent Australian-owned proptech platform that helps home buyers, home sellers, and real estate agents research property data on Australia’s 12 million homes for free. Head to Residz.com, plug in your own address, and have a play!

Photo by Tierra Mallorca on Unsplash