#13: Top Buyer Mistakes

[00:00:11] Melbourne will be hot throughout the day reaching a high of 38 degrees with a late change and possible thunder in the evening with a forecast low of 17 degrees. First time, second time, third and final time, it's sold!

[00:00:35] Hello Melbourne! I'm Lisa Parker and together with Cate Bakos we're bringing you a dose of our property market in detail. I'm Cate Bakos Bakos. Lisa and I are both buyer's agents who work on opposite sides of the Melbourne market and we've clocked up over 40 years between us in the property industry. Join us each fortnight to hear some exciting stories from our coalface, market trends and some juicy auction updates. This collaboration has been a long time coming. We hope you enjoy.

[00:01:08] Hello Melbourne and welcome back to the Melbourne Property Hour. Lisa and I have a doozy of an episode today. We've put together our favourite list of the biggest mistakes that home buyers make. We've actually got 11 and we're going to kick things off today with auction mistakes. And Lisa, we were just chatting about this earlier. I would love you to open up with the first mistake and give us an example that you've seen recently.

[00:01:37] Yeah, look, I think when it comes to auction there are quite a few mistakes and I guess we're going to dedicate probably half the episode to the stuff around auctions because auctions have certainly been a theme for Melbourne, although that might change a little bit with the new legislation that's coming, which we'll have to touch on once that begins and share how that's affecting the market. One of the mistakes that I do see home buyers make when it comes to auctions

[00:02:01] is not reading the state of play properly on the ground whilst things are unfolding at auction. And specifically what I mean by that is I've seen people pull up stumps against another competing bidder who was well and truly over their budget and had no money left. And it was evident that the buyer that I'm watching had money left and they felt defeated

[00:02:28] and so they pulled the pin when another one or two grand would have actually got them over the line. And conversely, we see the opposite when somebody keeps stretching well beyond their limit against somebody who clearly wants it more and is going to win. Because it's always very evident to us and to real estate agents usually who is going to win the auction. Even my six year old son's got quite good at calling because he comes to watch a lot of auctions with me.

[00:02:55] He's got quite good at calling who he thinks is going to win. And you can always tell, can't you? Yeah. I mean it takes a very experienced bidder, you know, a professional bidder to give the illusion that they will win. And we do that. That's our job. I have people come up to me asking for cards or saying, oh my goodness, you just, you were never going to stop. I don't like to tell people, hey, I had $2,000 left in the budget or you'll never guess it. I landed on my final number.

[00:03:24] I couldn't have gone a dollar more. It happens a lot because we know how to read the play. And in fact, I sometimes say to my clients, if I'm bidding for you and we get to the very, very end, and I think the other person is on their last legs, they've only got like $500 or $1,000 left. If I go over your budget by $1,000, I'll take that off my fee. And I would only do that if I'm so confident that with that extra little bid, I've got it.

[00:03:54] And you'd be surprised how many times that's happened. Yeah, I agree with you. The amount of times we've landed on our last bid or pretty close to, but nobody would have known because of our bidding style. It's really interesting. And the things that a lot of buyers do, they get to the auction, they have a vague idea of where they'd like to land, and they usually pick a round number.

[00:04:18] And then the idea is let's bid to X and then see how we go, which is a terrible plan because it's the see how we go bit, where the wheels come off. When you've got that social pressure, you've seen social proof that the property is indeed what you thought it might go for because there's still three other people standing, and then you're there consulting with your partner. And I can lip read at the best of times. Should we go another one? Do you reckon another 10? Or should we just go to one point, whatever?

[00:04:47] It's heartbreaking to see it because they're doing that, having what should be a very private conversation, while an auctioneer is screaming and everyone's staring at them. Yeah. And the auctioneers are trained extremely well and they know when to put pressure on and when to take the pressure off and bide time to give people more time to think. So they're extremely skilled.

[00:05:09] And I think with all of the emotions running, it can be quite difficult sometimes for us to think clearly as buyers who are not experienced at bidding, and they can make a poor decision on the fly because they're not in their thinking brain because adrenaline's taken over. So, yeah, it's really interesting to watch that play out. The other thing that I think when it comes to auctions, people get wrong is misinterpreting quote ranges.

[00:05:36] I think there's an assumption that I hear often, oh, you know, so we add 10% on the top of the range. And it's not what it is, but that's what people think it is and that's what they think they need to do. And the result of that is that people are often going to think, oh, well, if I add 10% on top of that range, say an agent has quoted the property absolutely spot on and then a buyer adds 10%,

[00:06:04] it means that they're going to miss out on that property because it's not actually going to go for 10% more. So if they've decided I'm not going to go to the auction because if I look at the top of the range plus add 10%, it's going beyond what we're going to pay for that property. So we're not even going to entertain that property. And then conversely, and I think this one's far more effective, is when we see a really low quote that's extremely light on and then you have 10 buyers on it all competing for it

[00:06:31] because they think that there's a chance that they're going to get it in the quote range. So the psychology of it's quite different. With two different scenarios, the same buyer will have a completely different thought process about it and it's just really not how it actually works. There's a lot of things that go into what a property is ultimately going to sell for. And the same property can sell for one number one week and then a completely different number two weeks later.

[00:06:58] And it could just be that it's a very, very quiet week and all of the auction results are lower than what they have been. And that happens particularly post-COVID where we haven't hit a consistent run where everything's running in a consistent fashion. We find that we go through periods where everything's pretty hot and then it cools down just a little bit for one or two weekends and then it's hot again. So it's very, very hard to predict in that way. And so people have got to become very skilled at pricing property. Absolutely.

[00:07:28] And then you've got your anomaly sales where the agent's done nothing wrong. There's nothing wrong with the property. They've had three buyers running hot on it. They're expecting a crowd on Saturday. And then one buyer stops answering their phone. And then when the agent finally catches them, oh yeah, we bought something else. One buyer changes their mind. They have had news at work and it's given them the wobbles. And then another buyer, you know, finds something else or whatever. The agent's gone from having three solid buyers

[00:07:56] and a competitive looking auction to nothing. And this poor vendor has to sell. And then the agents might ring us and say, hey, I don't know what's gone wrong. I've lost all my buyers. These vendors are really going to make the market. If you're still there, I know I told you that it's probably going to go over your client's budget, but you should give it a shot. I've picked up so many great purchases when we've had that intel. And that's just, you know, outside of the agent's control in a lot of ways.

[00:08:24] And then there's the other auction quote ranges that might be based on a really low reserve, a deliberately low reserve. And that might be because it's a bank repossession sale or the vendors are just really, really confident. They know they've got 50 people on it. Well, I shouldn't say that I'm exaggerating, but they know they've got like eight or nine bidders. And so they've set a really low reserve because the reserve doesn't matter. They know that it will get pushed up. So they're the things that buyers don't understand about auction quote ranges.

[00:08:53] And applying a rule of thumb is one of the most dangerous pricing things that a buyer can do. And it gets tricky for buyers because, you know, you mention about the agents ringing at the last minute and saying, everybody's fallen off the campaign. I think you can pick it up for your budget, come to the auction. And then conversely, we've got agents who will intentionally say that when they know they've already got a good crowd coming, but they want to push. So for example, let me just step back a little bit.

[00:09:21] They might have a buyer that they know has say 880,000 to spend, but they know their second best buyer only has a maximum of 800 to spend. And so what they need to do is bring more buyers into the mix to be able to push the price up to a point where they're extracting that 880 out of the crowd. Because if they don't do it, it's going to end at 810 and they're not going to get the most amount of money out of all of the buyers there. This is how clever selling agents are.

[00:09:50] And with all the infrastructure and software they've got available, they can literally have all of this information on file about all of the buyers. And, you know, when you're helping clients prepare homes for sale and you're assisting them with a sales campaign, when you're walking them through a sales campaign so they don't have to deal with the selling agents, you see all of this. You see what they've got on all of the buyers and you know how they're thinking. So we can use all of that against them. But for the everyday buyer off the street, they don't necessarily have access to all of that information

[00:10:20] and know what the agents are thinking. And so the agents will ring around and say, oh, look, you know, we've got hardly anybody, nobody's confirmed. When in fact they do, what they need is more competition to be able to extract the top dollar. And so it can get a little bit confusing for buyers, I think, because every scenario is a little bit different and there's no black and white hard and fast rules. And as buyer advocates, our job is to interpret and ask the right questions

[00:10:48] so we can see which scenario we're actually dealing with so that we can call it right for our clients. Yeah, I love it. And that's just touching on the auction quote range. It's not touching on offers to try and buy the property prior. That's another episode altogether. Yeah. And I think also it depends on who you're talking to within the office too, doesn't it, Kate? Yeah, it does. Because sometimes we have our favourite contact. We've got a really good relationship with them.

[00:11:17] But if they don't know what's going on behind the scenes or they don't know what the vendor conversations are, you might be at a disadvantage. And then other times, you know, they'll look in the CRM and they'll give you the sticky on the deal and the listing agent might be a little bit more secretive and you've got your person on the inside that can give you that information. There's so much that goes on in a buyer's agent world. But I know that the average buyer wouldn't have a clue about all of these things. And when you get the phone call from the junior assistant

[00:11:46] and you ask them all the questions and they're just regurgitating what they've been trained to say because they haven't yet been trained on how to deal with buyer advocates. And so they're trying to give us the same spiel that they give the buyers off the street. And so we hang up and then ring the director or ring the lead agent and get the real information. Oh, absolutely. What do you think about buyers who come to you? I mean, I have this a lot and I'm sure you do too. Buyers who come to you and say, I just don't want to buy anything at auction. Do you think that's a mistake?

[00:12:17] Massive, massive mistake. In Melbourne, you know, we're the auction capital and I know a lot of other capital cities do auctions. A lot of regional cities do. But to say no to auctions means that you're saying no to a lot of really good properties. And the beauty about an auction is that it's transparent. There's no games being played. The agent's not flipping how they're going to deal with competing buyers. You know, they're standing in a street. They cannot do the best and highest or, you know,

[00:12:45] chop buyers out or sell it without coming back to you. It's a public auction. So avoiding auctions, I know that it comes from a scary place. Sometimes it's just about public speaking fears. You know, people don't want to stand up and bid in front of a crowd. Other times it's that high pressure. It happens so quickly. And for a lot of people, it's the idea that it's unconditional and they've got to have all of their due diligence done and paid for. And, you know, if you've lost an auction and had your heart broken, you'll hate them.

[00:13:14] But you've got to get back on the horse. It's a lot of energy and emotion that goes into preparing for an auction because there's that wait period as well. You know, there's a three to four-week campaign and you've got to sit through those three to four weeks waiting and getting all of your prep work. It's definitely a huge investment of time and energy. And so I can understand why buyers would want to avoid it. And I think people are really fearful of overpaying. But like you said, you've got the transparency

[00:13:43] and that's what we like about auctions is that it's really transparent what's happening with the other buyers. Whereas when you're in a private offer situation, the agent can be saying anything to you and it's your job to kind of work out whether or not they're telling you the truth in the full story or not. Yeah. Yeah, that's exactly right. And it's interesting that you talk about the fear of overpaying. When I flip through the auction results on a Saturday night, you see a lot of underpaying.

[00:14:10] It can be quite exciting, sometimes quite devastating. You're looking at a result thinking, oh gosh, I'd tipped that to go over my client's budget and look at that result. They're the ones you don't want to miss. Yeah, I've gone to auctions fairly certain that it was going to exceed clients' budgets, but I've gone just in case because sometimes weird things do happen on a Saturday that are unexpected. Yeah, I love them. I want to chat about buying the wrong title type or the wrong zone

[00:14:39] or the wrong apartment size. And when I say wrong, it's stuff that the banks don't like and properties that might not be covered by a residential pre-approval. What can people do to avoid this? Because it's hard to teach in one episode all of the things that we should be avoiding in asset selection. But what's a basic overarching thing that buyers can do? Look, I think it's really important to get a good conveyancer

[00:15:08] or solicitor to do reviews for you. And the emphasis is on good because I'm seeing a lot of conveyancers miss a lot of important information that they're not passing on to their client. Or they might just send them back an email with dot points, but there's no way to communicate with the conveyancer to ask questions. And when buyers don't necessarily know what it means, they just read the dot points and go, okay, that's fine. And then they proceed because it's not a conversation

[00:15:36] and it hasn't been pointed specifically out what that actually means. Whereas a great solicitor or conveyancer will explain to you the dangers or issues with what they're pointing out. They're not just pointing it out. They're saying this is what could happen with this. You need to speak to your bank. You need to speak to your broker. You need to find out how much they're going to lend on it because it's going to affect your LVR. That's why we need really good teams around us

[00:16:04] to point these things out to us or to buyers who are purchasing who may not be across all of these minor details, which are actually pretty big things when you buy something and you're shocked to learn that it's not the right zone. Yeah. It's a really interesting one and it can be terrifying. If someone does the wrong thing, you can't get out of a contract. You're stuck with a property that you have to finance. We've got a couple of streets in Yarraville

[00:16:30] and the majority of the street is residentially zoned and then one end of the street is industrial zoning. And the implication... Oh, ouch. Yeah. So the good news with that is if you have the cash on hand and you don't need a loan, you'll probably buy the property about 30% cheaper than the other end of the street. Very pretty house. Everything looks the same, land size is the same, same street but different zone. If you don't have cash, you're looking at a loan scenario

[00:16:58] where you have to qualify for a commercial loan. You need to have a 40% deposit or thereabouts and your loan term is no longer 30 years, it's 15, which pushes all of your repayments up. And for a lot of people, they wouldn't be able to cover that. They wouldn't qualify for that loan because they couldn't service the loan based on the bank servicing calculator. So putting your hand up at auction without understanding the zoning implication or the title type.

[00:17:25] We chatted about Strata and Stratum and company share. They're the things that buyers need to know. And if you haven't had a review or if your conveyancer hasn't pointed it out and given you the implication of that and you haven't had a chance to check with your banker or your broker, you might be buying something that you can't finance. I saw a comment online just over the weekend actually from a buyer in Victoria who was lamenting the fact

[00:17:53] that they purchased an apartment and there was a special levy had been raised on the apartment which they bought, settled, moved in and then it was a shock to them that they had all this extra money they had to come up with. And my conclusion is that they simply did not get a contract review or their conveyancer did not point it out specifically because that would have been in the contract and in the notes in the owner's corporation certificate and they've missed it.

[00:18:21] And so it wasn't that, you know, the surprise was on them because they hadn't done the right steps, had gone through the right steps to be prepared to purchase that property. Yeah. I see it a lot with people planning to do something, say planning to put an undercover garage in or a pool in the backyard or an extension on the property or subdividing it and they don't do their DD and understand that they're precluded from doing that with this particular property that they're about to buy.

[00:18:50] There might be a restrictive covenant on it or it might be a particular zoning type that doesn't let you do those things or it could be a massive easement running through the backyard and then they find out afterwards that they've bought a property that they can't create their dream home on or can't follow through with their business idea because they didn't do the DD. Yeah. And if they haven't communicated with their solicitor or conveyance of what their plans are for the property, that can become problematic as well. Yeah.

[00:19:18] Now, I think one of the biggest mistakes that I see quite often with buyers and it's heartbreaking when I see this is when buyers have been in the field looking at homes and the average time it takes to buy a property for a home buyer in Melbourne is roughly 10 months and about six of those months is really spent understanding what the market is, what you can buy and what suburbs are appropriate for your budget.

[00:19:47] And then the remaining couple of months is where buyers are usually getting pretty serious and they're seriously pursuing properties, going to auction, making offers. And they've, you know, there's six building and pest reports in, maybe eight, and they're over it. They've almost spent a whole year looking for real estate every single Saturday. And it's not just the Saturday. It's all of the mental load and the emotional load

[00:20:16] that a home buyer carries whilst looking for a property because they're thinking about it all day. They're waiting for a real estate alert to come up on realestate.com.au with their perfect dream home. They're going home, talking to their partner about it or their parents or whoever, thinking about it, going to sleep, thinking about it, imagining living in the house and they have loss after loss after loss and they get what we call buyer fatigue. Now, when a buyer experiences buyer fatigue,

[00:20:44] they are the most vulnerable property buyer in the whole market. And agents know when a buyer has buyer fatigue. It's written all over their face. It's in their expression and in their conversations. And it is the perfect opportunity for an agent to introduce them to a property that they ordinarily would say no to. But they're so desperate and so wanting to get this property search over and done with, they simply don't care

[00:21:14] and they just want the property search done. And so they say yes to a property that ordinarily they would have said no to. And so this is the buyer fatigue thing I think is one thing that buyers have to be extremely careful of. And if you're starting to feel that buyer fatigue, I think a good tip is to put the brakes on, have a little bit of a break for a couple of weeks and come back fresh or get the help from somebody like a buyer's advocate

[00:21:41] who can step in and just prevent you from making a silly mistake because this is when people overpay. Or buy a bad property or they buy something that won't last them a long tenure at all. So they've got then a bit of an issue with lack of future proofing or they've bought something that it'll do. And within the year they're thinking about what they should have bought and what they could buy. And so then they've got more stamp duty to contend with and they're jumping back on the mouse wheel all over again.

[00:22:11] Another one that can cause desperate buying, you know, I call it buying a 6 out of 10 when you should have been looking for a 9.9, is when they've had auction heartbreak or negotiation heartbreak. And by the time they come to us, you would say it all the time as well, we've been looking for a year and a half, blah, blah, blah, blah, blah. And there's one thing that's just broken, the straw that broke the camel's back. And it's usually something like we're on this property, we were ready for auction this Saturday,

[00:22:40] we only got a phone call two days ago, someone had already offered X and we only had two hours to pull together an offer. I was in a work meeting, my husband was overseas for work. It was just too much and we missed out on it. Now we've found out what it's sold for and we could have gone to that. And they just are worn out and devastated and they've realised that someone else can field those calls when there's a two-hour deadline. You could buy as agents, we can whip a whole team into gear

[00:23:08] and get D-Day done really thoroughly and really quickly when we have to. And your average buyer who's at work or juggling kids or whatever business trip, they cannot do that. And so it's these experiences that can lead people to make a six out of ten choice. And then the last one is where a ticking clock dictates them moving fast. So instead of just saying, you know what, this is really intense pressure and we're not going to nail it with this tight timeframe,

[00:23:37] let's rent something and be prepared to break our lease once we've purchased our home. That's the better option. But a lot of people are saying to me, well, I don't want to move twice. I don't want to get the removals truck twice. I say do it, move twice. It's horrible, but it's not as horrible as buying a six out of ten. And then having to live with it for the next 10, 15 years. We'd love to hear how some of our tips

[00:24:06] are helping you on your property journey. If you'd like to get in touch with us, jump onto our website, themelbournepropertyhour.com.au. You can either leave us a written message or you can record it as a message. Let us know what you'd like to hear more of and tell us a little bit about some of your successes. If you're enjoying the show, please tell your friends and click the follow button on your preferred podcast platform. Now this next one was yours and I thought it was so clever.

[00:24:38] Selecting an asset that underperforms and not just because we all want to have a bit of capital growth. If you're missing the growth that you should have got, then your subsequent move will be impacted. Because if you're not getting enough capital growth in your market, then when you want to upgrade to your next family home, which is likely going to be the longest term family home, you've really done yourself an injustice. Yeah, I find that a lot of home buyers that come to me

[00:25:07] and you're probably the same, really love the fact that I've got such a strong background in strategy and property investment because whilst they are looking for an owner-occupied home, they're thinking a couple of steps ahead and they know they want that asset to perform well and they want to be thinking about the capital growth and they might make some compromises in their ideal aesthetic or the condition of the property. They might make a few concessions around that

[00:25:36] to get access to greater capital growth. And then on the other hand, I've got fresh new buyers coming that have not really thought about this and when I talk to them about whether or not capital growth is important to them and they start thinking about it and they think, well, we're going to be in this property for three years, we're going to upgrade into another property, we do need that property to perform, then suddenly it's on their radar and I do think it's really important. And what we're seeing at the moment

[00:26:03] is in the apartment market in particular, we've got a lot of young people buying apartments close to the CBD at the moment in prime blue chip locations, South Yarra, Paran, Windsor, Armadale, et cetera, et cetera. And they've purchased in the last two to three years and they're ready to upgrade out of that asset and into something else. And what we're finding is that they're not being able to sell for more than what they've purchased the property for. And in some cases, they're actually selling at a loss.

[00:26:33] And so I think it's really important for particularly first home buyers to be really careful about their asset selection because I think particularly young single women, they want to move into something that's pretty and lovely and they don't want to have to do any work too, which I completely understand. But there sometimes is a compromise that you do need to consider and you need to think about whether or not it's actually the right move. Yeah, so well said.

[00:27:00] The next one happens almost all the time and it's not just a first home buyer thing. It also happens to upgraders, downsizers, investors, listening to the wrong advice from the wrong people, particularly people with limited property experience. And everybody is a property expert, right? Yes. Yeah, if you've bought a property in your life, well, you've done it. You've got stories to tell and you might be feeling like you're better than the average Joe at it, but it can be really dangerous

[00:27:28] and it can be really confusing too because you're getting a lot of opinions. I was on a sailing course one weekend. I can't remember what, you know when you get your certificates in the various sailing levels? I was doing one of my levels and I was the only female on the boat with about six blokes and the captain asked me, what do you do for work? Oh, cool. What's happening in the property market? Before I could answer him, all five of the other blokes answered for me and they all had these opinions

[00:27:57] and advice about the property market and I was just sitting there watching it all unfold, thinking you've actually got a property expert sitting on this boat but you don't want to hear what she's got to say. Instead, you all want to share what you think and most of you are so wrong, it's not funny. And I thought this is what happens to people and because they're so passionate about it, their opinion sounds valid and real because they're saying it with so much confidence and so much conviction

[00:28:27] and I think the person in the room that is the loudest and has the most conviction is the one that usually everybody stops and listens to and I think it's a big mistake when this happens unless you're talking to somebody who is currently in the market, has quite a few purchases under their belt or has a lot of experience in property. They're just the wrong people to be like, you just shouldn't be listening to anybody that doesn't fit that criteria. And then you get your buyers that have a support crew that come out with them

[00:28:56] and sometimes they'll bring different support members so they're getting all of these opinions, not necessarily unsolicited because they're saying come and help me but all of their individual preferences and experience in life will taint the advice that they're giving this very vulnerable person and if they are getting conflicting information, that can be really hard for them. It can also make them quite anxious about the process because Bob said you should be buying in this particular suburb

[00:29:26] and Sally said I would avoid anything that's strata, avoid it completely. And so then you're caught in a situation where you've had advice from people who love you, telling you what not to do and you might want to do it and I think the best thing that you can do, it's like naming a child. Don't tell people the name or just tell the person that you trust the most who's always got your back, who will be respectful of your choice. Tell them the baby's name and when the baby arrives in your name,

[00:29:55] you just tell everyone and no one complains or tells you you made a mistake because baby's already got a name. Yeah, I think that's really great advice. I think, you know, where it can be great is when you ask somebody what's it like living in an area and if they live in the area, they're the perfect person to listen to on those things. That's the kind of advice that I think is really valuable. In fact, if we're talking to neighbours, we try to find out, you know, what's the street like? What are the neighbours like? What street do people go down that gets blocked up?

[00:30:25] You know, we're always looking for that intel and I think they're the perfect things to be leaning on other people for. And I think if you're using an advocate, the perfect way to navigate this is, sure, listen to what the other people are saying, but don't take it on as if what they're saying is 100% true and just fact check it with your buyer's advocate to say, what do you think about this? I've had situations where people, like you said, have become very fearful because a well-meaning person in their life,

[00:30:54] their flatmate or their friend or whoever it is, has got into their ear and scared them and then it's made the journey a little bit challenging because they've got in the back of the mind that their friend's saying one thing, I'm saying something different and they don't feel confident and comfortable because they're hearing conflicting information and their friend has been so loud that it's really made them quite nervous. And worse, I've had people come to me because ChatGPT told them X, Y, and Z.

[00:31:24] Now we know that ChatGPT scrapes Reddit and for a lot of its answers and that's where it's one of the sources that it gets a lot of the answers from. And so it's like, why would you listen to strangers on the internet that you haven't been able to verify their exposure or qualifications or experience with property and then doubt somebody who is actually in property every single day and has, you know,

[00:31:53] transacted well over a thousand. So it's quite interesting in this day and age with things like Claude and ChatGPT. Yeah, I know when I'm getting feedback that they've found off the internet for sure. I can smell it a mile away. Yeah. Let's chat about the implication of not getting a building pest inspection report. And I know that when a property is near to new or really nicely kept and presented, buyers often say to me, oh, I don't think we need one. What do you think?

[00:32:21] My answer is if you're spending this amount of money, I'd always get one. As a preventative, if nothing else, or something that gives you an idea of what maintenance items might be coming up and what the priority items could be. And I've seen brand new properties fail building inspections. So we can't assume that because it's new, it's good. The brand new ones are actually the scariest for me. When I'm looking at an older home,

[00:32:47] I can see the evidence of issues in the building, whereas a brand new one, it hasn't had time to breathe yet. And so it's not really necessarily showing the issues. So I think it's important more than ever on a brand new property than it is an older property. And the other thing is, I mean, I know that some advocates do this and it's something that I will not, absolutely will not do, is forgo a building and pest inspection report because people go in, like you said,

[00:33:16] and go, oh, look, everything looks fine. The reality is the most sinister issues with a property are often hidden and it needs a specialist to go digging to find them. And that means getting into the roof. It means getting under the subfloor. There are two things that I don't do. I spend a lot of time at a property and I'm specifically looking for telltale signs of issues, but they're two things and I don't get on the roof either. Yes, exactly right.

[00:33:44] And we don't have all of the gear. I've got a moisture meter, but it's a little Bunnings one. I haven't got the same thermal gear that a building inspector has when they are identifying there's water ingress. And water is such a massive threat to a property. But yeah, you're absolutely right. We're not building inspectors and so we have to rely on the professionals. Our job is to field properties and to reject the ones that we can spot the obvious issues.

[00:34:14] I can see issues and I know that's a complete bathroom rebuild or this house absolutely needs restumping and you haven't got the budget for it. That's the stuff that we can detect. What we can't detect are those really sinister things that you've just mentioned. I really want one of those moisture meters, you know, the $3,000 to $4,000 ones. That would be the best toy, tool, tool, tool, not toy, tool to have in my toolbox. Yeah, we look like Ghostbusters. That'd be ice. I love it. The next one on the list

[00:34:44] is one that also comes up quite often and that's rejecting a outstanding 9 out of 10 or 10 out of 10 property because it's come up too quickly in somebody's property search. And the biggest issue with this is because they don't have context. They haven't been in the market long enough to know what's out there and they have no contrast to say, well, yep, I think it's good but I haven't looked at 20 bad ones to know for sure that it's good.

[00:35:12] And so they skimp and don't go ahead because they're afraid to pull the trigger that early in their property search. And then that ends up being the one that haunts them for a little while that they regret not moving on but they didn't know what they didn't know. And so it's a tricky one to overcome. Yeah, it takes a lot of trust in your buyer's agent. And the hardest part about this is if it happens at the very beginning of our working relationship,

[00:35:41] there's obviously a degree of trust there because they've chosen to work with us but they haven't got that same bond and that same level of trust as what they would have if we'd been working together for two months and we've missed a couple and we've fielded a lot and we've rejected some and they've seen us in action actively saying, yes, it's good but I know we can get something better. Let's keep walking. And I call this one for Barbo, fear of buying before a better option. And it really does strike. It's the hardest thing whether you've got a buyer's advocate

[00:36:11] or whether you're going on your own. If something really good comes up quickly, you'll be looking at a checklist, you'll be looking at the property and thinking, well, it ticks every box but I just haven't seen enough. It's so true. I personally, and this was before I've become a buyer's advocate and then after I was a buyer's advocate, I've personally on two occasions bought a home on the very first day of looking. One was we shared that story in our first purchases and then the other one

[00:36:40] was the home that I live in now and we decided on the Tuesday it was time to move and then on the Saturday I had several open for inspections to look at the second property we saw. We walked in, we said, this is the one and that's the one we bought. And that's experience. Yeah, it can definitely happen and also for our clients, sometimes they sign on and begin the process as a client and the week that they've signed on the perfect property arises for them. So it can happen very early on in somebody's search. Yes. It's the worst, isn't it?

[00:37:10] When you're signing someone on and you're thinking, I just got an off market yesterday. I think it's perfect. I didn't have anyone for it yesterday but today I'm going to get you through it and be prepared. You might really love it and yeah, they can be the ones that haunt too when they reject them. Yeah. Kate, how many times have you heard somebody say I'm not looking at that property because I can't stand that agent? Very, very often and I have one phrase for that. Never let a bad agent

[00:37:39] get between you and a good property. It's a hard one to overcome though. People who hate agents are either terrified of being rolled by them and having things go wrong or they just really hate them and want to punish them. Yeah. And it can really bite. I've been hired a lot of times because people just can't stand the agents that they've been meeting at the door and don't like how things unfold which is fair enough. The system is really not designed to benefit the buyer.

[00:38:09] It is wholly and solely designed to benefit both the vendor and the selling agent and it's understandable that buyers don't feel great in the process because it's not a great process for them with it being designed for other people in mind. But the amount of people that come to me purely because they hate real estate agents I would say probably is 30% of my home buyer business. Yeah, I think that's a really fair call and it's unfortunate because I don't think that 30% of agents are bad but you know

[00:38:39] if someone's had one horrible experience or they've had a bit of heartbreak or they've felt that they've been dealt with unfairly that will change their perception for a long, long time. I think the biggest issue here is that when you're buying a property things on the surface seem like they should be simple and straightforward but then you get into the process and you realise there's actually a lot of things happening behind the scenes and you might not necessarily know exactly what they are as a buyer

[00:39:08] but you can definitely feel it and they sense there's more to this than I actually know and understand and so they can feel that things are not weighted in their favour and it doesn't feel good and that's completely understandable. Yes. Well, we're at our last one. Last one. Yeah. Miscalculating all the settlement costs. Happens a lot. Yeah. Usually with first-time buyers but I've seen upgraders and downsizers get it wrong as well.

[00:39:37] So let's run through them all. Yeah, I think there's a bit of a list of things that people have to be accounting for when they're doing their calculations and often a good broker will actually write all of this out for you but in case they don't the things that you need to be looking at is your stamp duty costs and there's some legal fees which you'll know up front but the thing that you might not necessarily know up front is the disbursements and the disbursements are the things that happen right before you settle on a property

[00:40:05] and it's where they calculate the amount of say for example the owner has paid rates for the property in advance and they've lived in the property for six months out of twelve months but they've paid twelve months worth of rates then they're going to do an adjustment for those rates and then you're going to have to pay for those adjustments in your settlement costs for your six months worth of the rates and so these things happen

[00:40:35] at the eleventh hour just about a couple of days before settlement and you get the additional fees that you weren't expecting but a solicitor should be able to give you a ballpark amount that you should anticipate having to pay above and beyond what your legal fees are and this is where I got caught out Kate remember we shared the story of our first purchases and I shared that I was $500 short at settlement and I asked mum for the $500 and she said no

[00:41:04] this is where I got caught out was just not understanding those fees yes you did okay because in my very first purchase I didn't calculate lenders mortgage insurance okay that can be a big hit depending on how much you're borrowing yeah it was a bit tricky the other one that people aren't necessarily budgeting for is due diligence and that could include for example building and pest fees now if you're DIYing your property search

[00:41:33] then I think you need to account for anywhere between sort of four to eight building and pest reports and a decent building and pest inspector is going to run at roughly $750 to $800 or $700 to $800 if you're using an advocate then typically I don't know about you Kate but most of my clients get away with only doing one but I always tell them to budget for up to three tops yes that's about right yeah and sometimes we've got to do two but I would

[00:42:03] say the vast majority of my clients only ever need to get one building and pest yeah I think I run at an average of one and a half and you'd like to think that one will do the job but yeah it's all about being prepped and you're right you bring on with the cost assumption as well a good thorough building pest inspector if they're doing both reports in one go it will be somewhere in the sevens maybe eight and if there's travel time as well if you're going into the regions they might put an extra

[00:42:33] $100 on it to cover their travel now the other few items that we need to account for is the additional banking costs like you might have loan setup fees for example and obviously they've also got mortgage what have they got mortgage solicitor's fees registration fees there's a few different types of fees that go into there and then you've got your insurances and the one that I think that people overlook as well is just having a little bit of a buffer you know when you're moving into a property you usually are spending a lot more

[00:43:02] money than you're anticipating so you've got your removalist costs you've got all of your connection fees getting keys cut but there's also all these little things that come up in the move like a lot more takeout than you would normally purchase running to the shops to buy something because you've packed it in a box and it's not accessible you know the amount of trips to bindings because you've moved into your house and all of a sudden you found seven things that you didn't realize at the time that you would need to change pretty immediately

[00:43:32] and then I always find that when you move into a new home even when things have been working before you've taken possession of the property in that first week or two things start breaking and depending on how old the house is and so you need to have a contingency you need a contingency for the things that are unexpected and then you also need your contingency for the things that are going to be expected because you're going to move in you're going to be super excited and you don't want to start buying furniture and buying things to upgrade the home and make it into

[00:44:01] a place where you want to be and all of that costs money and so thinking about having adequate buffers in place is really important don't spend your last penny on the property I absolutely agree and you might be dealing with cleaners and it might not just be a standard house clean you know something might be pretty hideous and then you've got your insurances not just dwelling insurance you'll have a solicitor offering you things like purchases caveats and title

[00:44:30] insurance you might need to provision for a couple of thousand dollars for stuff like that so you need to read up on it or ask some questions at the onset so that you can provision for all of the insurance that you'll be needing I think title insurance is one of the best ones out there especially for an older property but it's not something that you want to miss out on getting because you ran out of funds I agree with you in regards to title insurance it's my favorite insurance I think it's fantastic

[00:44:59] yeah so many people don't know about it but it's it's one premium that's it it's not annual it's once for the lifetime of your ownership and it's very expensive but it covers you for all kinds of things and if it's an old property with old fence boundaries and potentially old plumbing works and iterations of things you might find that that insurance really looks after you yeah well I think that wraps everything up from the mistakes that we commonly see

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[00:46:08] thank you for joining us on today's episode of the Melbourne Property Hour we hope you've enjoyed the show and we look forward to you joining us next time