'FOOP' alert: Low-balling is back among buyers
Buyers are driving a hard bargain in the real estate market, after a long period of not having the upper hand.
The days of low-balling are back.
A property expert said "FOOP" has crept into the housing market - "fear of overpaying" - as the number of profitable sales decreases, data shows.
Buyers are driving a hard bargain, with research revealing the volume of profitable sales has dipped for the first time in two years.
In a jaw-dropping example, a cheeky Adelaide house hunter earlier this month offered almost $400,000 less than the asking price for a period home in Torrensville.
Although that audacious low-ball understandably didn't work, it points to a sentiment among buyers that they finally have an upper hand, after a long period of sellers holding the power, and they are reacting to the perceived shift in power.
READ MORE: The number of mortgagee sales in Australia has recently risen
Auctioneer Troy Malcolm prepares to sell the home. (Rhett Wyman / Supplied)
CoreLogic analysed 106,000 sales over the March quarter and found a "modest" decline in the number of sales making a profit.
Data shows 93.7 per cent of sales banked a margin, compared to 94 per cent in the December quarter.
It was the first overall decline in the volume of properties selling for a profit since August 2020. The median gain from house resales nationally stands at $370,000, and $173,000 for units, CoreLogic data reveals.
The Torrensville buyer was hopeful of a bargain in a cooling market.
The home at 2 Northcote Street had a price guide of $895,000, but the vendor got an offer of $500,000 in private negotiations prior.
It was revealed to the crowd by the auctioneer that $500,000 had been put forward but it had been firmly rejected by the vendor.
The house is still on the market with an adjusted price guide of $895,000 to $950,000.
Buyers' advocate Michelle May said it is possible to snare a property for under the asking price.
However, the principal of Michelle May Buyers Agents said there is such a thing as aiming too low, and buyers should not mistake the change in market conditions as a total absence of competition for the property they want.
"You don't want to approach the negotiation by insulting the vendor and the agent, because then they will be on the back foot straight away," she said.
READ MORE: Blanche d'Alpuget offers Hyde Park apartment Sydney for sale
"...I would not underestimate the power you (the buyer) has at the moment," buyers' advocate Michelle May said. (Domain)
"It is a mistake to think there is no competition anymore, so you don't want to cut yourself out of the race. People tend to forget that a lot of real estate negotiations are still run by emotions and ego, and if you get on the wrong side of people they will not deal with you.
"Overly-confident and arrogant is never the way to go, no matter what the market is.
"But I would not underestimate the power you (the buyer) has at the moment."
Ms May said the best way to launch a negotiation is to allow the agent to explain the circumstances, and research is the method to preventing FOOP.
READ MORE: Screen Icons: A look at the iconic 'Mrs Doubtfire' home
Your offer for a property will be shopped to other buyers to match, so we certain you are ready and willing to get the transaction done. (Rhett Wyman / Supplied)
She said knowing the background to the listing, such as whether the vendor has bought elsewhere and therefore may need to do a swift deal, will guide an approach.
"Have an understanding of what the recent sales have been around that area, and do a black-and-white analysts of what you are looking to purchase," Ms May said.
"People are so keen to get an offer out there they forget there is a strategy that comes before it. I would never talk numbers with an agent unless I am in a position to exchange immediately.
"If there are other buyers out there, the agent will use your offer to leverage it to the other buyers. He is shopping your offer around and if you are not in a position to lock it in, you are negotiation fodder for other buyers who are ready to move.
"Your building, pest and strata reviews, is the school catchment in order, is it under a flight path - you need to understand all of these things before you determine how much you are willing to pay.
READ MORE: How to use equity to fund a small but dreamy home renovation
Determine the "emotional value" of the property, auctioneer Andy Reid said, and factor into your calculations. (The Age/Domain)
"And when you meet with the agent, let them do the talking. Ask them what the vendor's motivations are. You could say, 'does your vendor have an ideal price in mind and what does that look like? Have they bought elsewhere?'"
Auctioneer Andy Reid said there is an "emotional value" to a property that should be considered as much as any other hard numbers.
"Work out your emotional value - there's a lot of data out there, price predictors, etcetera, but you have to account for the emotional tax that you're likely to pay if you love the home above all of that logic," he said.
"So if you prep for that tax then you can act with more clarity."
Mr Reid advises not passively waiting until a property passes in at auction - instead, win the position to be the first to haggle.
READ MORE: This is what Australia's median house price buys
Accounting for a small drop when working out what your budget should be to win the keys at auction. (Getty Images/iStockphoto)
"If the auction stalls, the smart move is to match the highest vendor bid so that you win the right to negotiate, starting from the lowest possible negotiating point and cancelling out any other buyers that may lie in waiting," he said.
And he warned buyers to be careful about the recent sales figures they look at.
"Right now, the rear-view mirror can see figures from a better market, so account for a small (but not ridiculous) drop when calculating your proposed bidding budget," he said.
