Double Dipping and Icebergs Ahead
Get the insights into our local property market with real estate expert Wayne Maguire.
OPINION: The property market is in an interesting phase right now and it won’t last, but I’ll talk about icebergs soon.
Currently I’m seeing more deals concluded between buyers and sellers which tells me two things. Firstly, the two groups are agreeing on current value. Now last year’s sellers were holding off and trying to sell in 2022 with a 2020 price. It just doesn’t work like that. Every week I’d hear – ‘‘I need to sell for X because of what I still need to pay for the next one’’. In reality that was a false belief that I blame on the real estate industry.
See if this makes sense: you have a buyer enquiring about a property; the enthusiastic salesperson pumps them up on what it’s worth and what they need to buy it for. The vendor meanwhile, is killing off genuine buyer interest. Hence sellers belief was that offers had to be more and yet in 2022, they would see properties sell for less than those agents were quoting.
Personally, I am 100% against price quoting but that’s a whole other article.
The second thing I see is that now it’s a normal or genuine market, no speculation is happening. People either need a bigger home, or a smaller home with ‘‘Death, Divorce, and De kids’’ being the drivers.
In this market, auction success is backup and this is where it gets to double dipping.
Please bear with me on a couple of assumptions or generalisations having worked on this for the past 20 years.
In my mind, all buyers are subject to finance. The difference between cash buyers and conditional or subject to finance buyers is that cash buyers have already got things sorted out and it’s not the seller’s problem. I picture that they are still borrowing from the bank but it’s approved, and the bank is happy with them and the house they want to buy.
The conditional buyer is borrowing from the bank just the same but they haven’t got it sorted.
Now it’s the seller’s problem. I favour the ‘‘cash’’ buyer in question for this reason because at the fall of the hammer, it’s an unconditional sale.
This is what I mean by double dipping. If it’s an auction and you accept an offer subject to the buyer selling their house I think there is a high likelihood you’ll be negotiating the price twice. Initially when you get the contract signed and then again somewhere between 30 and 90 days later. Don’t be surprised if they come back telling you that they haven’t got as much as they thought to pay for your home so the numbers won’t work unless you drop your expectations further – double dipping.
I don’t think it’s a deliberate strategy but a horrible reality the buyer is forcing on you when they see their reduced market value and then expect you to share their pain.
It’s two bites of the cherry, as opposed to ‘‘Cash is King’’ at auction.
Icebergs ahead is a concept for salespeople and sellers to be aware of.
With the increases we have all experienced at the supermarket for example, life is more expensive than ever. Looming large are increased mortgage costs for those who purchased in 2020/2021 and facing rolling their mortgages over this year. Unfortunately, it’s an uncomfortable scenario for a lot of homeowners.
So we will be selling icebergs. Above the water it looks like a normal sale with no signs of distress. But below the water, the weight of the mortgage is unsustainable. A lot of owners will tell the salesperson the true situation. These are distressed sales before being forced sales. And that affects prices in the market.
Even if you are coming on the market later in the year and not under pressure, value will be impacted by vendors selling at an exit price. Enough to exit the mortgage. The price creates competition you don’t need. If you are thinking of selling I’d say, get cracking now.
Wayne Maguire is the CEO of Maguire & Associates, which owns several Ray White branches across East Auckland, and he is an award-winning auctioneer. Maguire calls about 400 auctions each year, negotiating and closing about $20m in sales every week. He is Ray White Auctioneer of the
Year and dad to five girls.