In the coming weeks, savvy investors should be prepared, as at this time of year there are always plenty of opportunities to get a good deal on Christmas.
During the silly season, most years experience a sharp drop in activity and enrollment, with the industry in semi-hiatus until the end of January.
In light of the unusual time we have just experienced, however, this year may look a little different, and serious real estate investors might be advised to reconsider their vacation plans.
A good time to buy
In the regular cycle, seasonal demand drops sharply at the end of December. Real estate listings start to decline from mid-November and deals crumble over Christmas. Most sellers want to sell their homes so they can leave and enjoy their vacation.
For real estate investors, this represents an opportunity.
As Christmas approaches, sellers are faced with the decision to try to sell quickly now or wait until next year to launch their campaign. If an owner has had their property listed for a long time, they may even start to feel hopeless as the vacation season approaches.
While in general demand declines during the Christmas period, it should be noted that each property market follows its own trajectory. Some markets are growing, some are slowing and some are booming. Current examples include the Brisbane market, which is now booming, while Sydney and Melbourne are clearly struggling.
Beware of a sellers market
In a sellers market, there are more buyers than sellers. These are booming, booming or recovering markets. A prime example of this type of market is Brisbane, where many tree changers and sailors are currently looking to locate.
A growing number of Sydneysiders and Melbourians are heading north with the goal of buying or renting in and around Brisbane. We hear that two out of three buyers in Brisbane right now are from across the border, and many of these interstate migrants are even happy to make offers without seeing them.
Low listings combined with a lot of interest results in the emergence of a strong sellers market. As Christmas approaches, we expect a further reduction in registrations, which will only add fuel to the fire.
As investors, we don't want to play a game where the seller has the power to play. We want to have leverage on our side to be able to negotiate. We want to be able to bid and pull out, not fight multiple bidders.
Buying Well in a Buyer's Market
In a buyer's market there are more sellers than buyers, a great combination for real estate investors. We are currently seeing buyer's markets in parts of Sydney and Melbourne and even in a few select areas of Perth. These are the types of markets where we can stretch our legs and enjoy the joy of Christmas.
As real estate investors we have to appeal to the psychology of those sellers who 'just want to sell the place'. These are the types of sellers who want a signed deal so they can go on vacation.
To get a great deal, we always need to split multiple offers across multiple properties and avoid getting stuck on any given property. It has to be about numbers and using the time of year to our advantage. Fortunately, there are some rules of thumb that we can use to gauge what kind of offer a vendor might be willing to accept. The key here is to understand both the seller's motivation and how the market views property.
To determine the motivation of a seller, we need to ask ourselves questions such as "Did he go from an auction to a fixed price and then lower that price?" If so, it may indicate that the seller wants to sell and is quickly lowering their expectations. As a general rule, the longer a property has been on the market, the more it is likely to be desperate, especially before Christmas.
There are also other factors you can take into account when you see a property for sale. Perhaps the property is currently leased making it difficult for the sales agent to access and show interested parties. Even issues such as poor presentation can negatively impact a sales campaign.
For an agent, closing a sale quickly at the end of the year makes their job much easier. If the property has been on the market for a while, we will often see real estate agents lose interest and move on to the next hot property. Typically, an agent's commission will cover approximately 30 days of work on a property. After this initial phase, the properties are open 'by appointment' which is a sign that the property hasn't generated a lot of interest, and it's something you could use to your advantage.
Your goal as an investor is to know your numbers and come up with great deals to try and hook the 'let's sell right here' type of seller. A salesperson eager to sell and move on.
Negotiate like a pro
Ultimately the best way to make money buying things is to stack the odds in your favor and then bargain hard.
Always get a building and pest inspection and renegotiate anything you find based on the final report. You can save $ 1,500 to $ 6,000 to $ 7,000 off the original contract price through a second round of trading. This is something that most investors don't do or know they should be doing.
The psychology behind selling a home from the seller's point of view is that it is a deal done once the offer is accepted. Negotiating a second time is when you can get a bigger discount because they're partying and just want the deal to be finalized.
A Tale of Two Christmases
As COVID held back transactions this year, in 2019 the uncertainty surrounding the federal election weighed heavily on the real estate market.
Last year, following the election result, we saw a spike in buyer activity that continued into Christmas.
Interestingly, sellers are increasingly motivated to sell as Christmas approaches. At Ripehouse, we've closed some of our best deals over the last few weeks of 2019.
Following the lifting of COVID restrictions and the return of confidence in the markets, we expect this year to be the same.
However, it is essential to understand that while the opportunities are plentiful during this time, you must treat each type of market differently and be prepared to bargain hard if you are to get a good deal.
Jacob Field
Chairman and CEO | Ripehouse Group
Jacob Field has been investing in real estate since the early 2000s and founded Ripehouse Group in 2011. Since then Jacob has helped thousands of investors buy their first or fortieth property. Jacob is one of Australia's foremost real estate researchers and experts.
