Speed is the new normal with home purchases. Here’s how to avoid critical mistakes that will land you a lemon.
Originally published on Linkedin.
New research from ME Bank highlights a worrying trend. More people than ever are purchasing property without doing full due diligence on it, and it’s proving to be a risky strategy.
More than half of purchasers are spending less than 60 minutes in a property before that go on to purchase it. This includes a growing number of people that are purchasing property completely sight unseen.
That is also the underlying reason why 61 per cent of buyers are only discovering issues with the property after moving in, and this can include some major issues. Among those that did identify issues, construction quality (32 per cent) was the most common problem cited.
As a result, more than one-third – 34 per cent – of those surveyed have experienced a degree of “buyer’s regret” following the purchase.
“More than one third – 34 per cent – of property buyers are experiencing a degree of “buyer’s regret” following the purchase.”
Unfortunately, conditions through the pandemic have ceded much control to the agents in the sales process, and the explosive demand for property has made it easy to pressure buyers into making a hasty decision. Walkthroughs can involve dozens (if not hundreds) of people, and occur at tightly controlled times, making it less than ideal for running a thorough inspection of the property and observing it at times that will put the liveability of the property into perspective.
Furthermore, when buyers are competing against people making hasty purchasing decisions, it creates the perception that they must also rush the due diligence process. You’ll feel like you need to make the purchase quickly yourself, otherwise you might just lose out on the ideal house to someone who can pull the trigger instantly.
Wresting back control
There are a few things that buyers can do to take control back of the process and remain competitive while still undertaking due diligence.
Firstly, having the finances in order before beginning the property search is important. This one almost goes without saying, but managing the financial side of a property purchase is time-consuming in itself and can distract you from focusing on the property itself.
Secondly, research heavily online before undertaking any inspections of the property. You may only get the opportunity for a walk-through, so go in prepared.
In this context “research” means more than simply looking at the carefully manicured photos on the agent’s website. A better strategy is to develop a laser focus on one or two suburbs that you would like to purchase property in, and really understand the dynamics of that local market. Look at every property that has been bought, and call agents to inquire about recent sales. This will give you a much better idea of the true performance and conditions of the area.
Finally, one of the biggest causes of concern when buying properties sight unseen is that many buyers are waiving the building and pest inspection. Getting on the front foot here is important. Prior to the walkthrough and open inspection, book the building and pest inspection. Then, rather than wait for the relatively sterile report 24 or 48 hours later, request a call from the inspector to directly discuss what they saw as they are leaving the property. You’ll often get a better insight into the true condition of the property when you can ask specific questions, and it cuts down on delays in getting the pertinent information back, which is key to saving time and making fast decisions.
As an added bonus, having the building and pest inspection organised prior to a walkthrough gives you an additional trick in the toolkit. If you show up at the property at the end of the inspection, you’ll often be able to get access to the property.
Preparedness is key when competing in a market where people are rushing to make purchases sight unseen. You don’t want to risk losing your dream home, but at the same time, it’s important that you manage the risk and find a way to do the due diligence so that you won’t end up with a lemon.