Property buyers should do their research, be transparent in negotiations and be prepared to miss out, experts say.
In the COVID-19 environment of rising unemployment and declining house price growth, some economists predict property prices to drop up to 10 percent. Combined with record-low interest rates, now could be an ideal time to get onto the property ladder.
Property investor and educator Steve Goodey and Ray White salesperson Chip McCabe share three tips for property buyers to help them avoid overspending in the current market.
1. Do research
Properties to be sold by auction don't have a fixed price, requiring buyers to do their research.
McCabe suggests talking to agents about price feedback and the level of interest.
Home-buyers should research the cost of required refurbishments and request a recent area sales report. Property investors should get a rental appraisal.
"Take remedial factors into account: are you going to have to spend any money on refurbishments," McCabe suggested.
"Tell each agent you meet at open homes what you're after and ask them what other listings they have that may suit you," Goodey added.
Buyers can also use online tools or speak to a registered valuer.
"I suggest homes.co.nz, the TradeMe Property insights page, QV and/or a registered valuation," Goodey said.
2. Be realistic about price
Real estate agents are required to present all offers on a Sale and Purchase Agreement.
For properties for sale by negotiation, it's important for buyers to be transparent and have good communication with the agent.
To be taken seriously, buyers should temper the prospect of 'getting a steal' with not wanting to offend sellers.
"Vendors aren't obliged to countersign or enter negotiations with an offer - they can reject it outright - and if this is the case you'll find yourself on the backfoot if you really want the house," McCabe said.
Sellers have different expectations, but most are willing to negotiate if the first offer is "reasonable".
"Some may have a bottom dollar which they need in order to pay debt or facilitate the purchase price on their next home... others may have less pressure to sell so are looking for that premium price," McCabe explained.
People wanting to make sure they don't pay too much in the current market should allow plenty of time.
"If you're trying to bag a bargain at 10 percent below market, you should prepare to miss out on 10 to 20 houses," Goodey added.
3. Set an upper price limit for auction
To avoid overspending at auction, buyers should set an upper price limit and not go over it.
"Often, a loud and proud bidding strategy works: timid whispering and negotiations with your partner can be a sign of weakness," Goodey said.
Spending limits are often difficult to guess, as the auction process involves a level of "gamesmanship". Bidders must be prepared to miss out.
"Walk out of the auction happy with whatever the result - there's always another house," Goodey said.
With property prices expected to fall, buyers wanting to avoid paying too much should take their time.
"If you pay 5 percent over market value right now, you've purchased six months' too early," Goodey said.
However, buyers wanting to take advantage of the current environment of low interest rates and economic uncertainty shouldn't leave it too long.
"You may own the house for 10 years, during which time your purchase price should become irrelevant compared to its increased value," Goodey added.