The power of the cash buyer
Loads of properties on the market, more and more coming on every day, and property prices in Wellington stagnant and predicted to dip further this year as the Government redundancies bite. So, how can you take advantage of the market?
Buy with 'cash'.
If you've been on the hunt for a home, you'll probably have gotten the sense that there's a lot of desperate sellers out there that 'need' to sell - they've either secured another home subject to the sale of theirs, are flicking off a rental to make their rental portfolio manageable, or can't afford their mortgage repayments so are letting go of their property to get on top of things. In a market where buyers are spoilt for choice and homes aren't selling at deadline/auction, even the most conditional offer has a good chance of being accepted - and that's what most are doing. I've certainly seen a major uptake in clients offering subject to the sale of their own home. But a conditional offer doesn't give you the real buying power you need to score yourself a bargain. Offering cash gives sellers an ultimatum - a guaranteed sale with money in the bank, or an offer that's subject to conditions and could tip over, leaving their home unsold and back to square one. 'Cash' is the way to drive prices down and score yourself a deal.
I've recently helped a client with lending who secured a home with a cash offer that was north of $100,000 less than the other conditional offer. The sellers had to move on another sale, and the certainty of the cash offer was worth more to them than the money. I've had other examples of deadlines being bought forward due to an early cash offer, effectively blocking people out who didn't have their ducks in a row ready to offer.
Cash offers allow you to control the narrative and be (very!) cheeky. This certainly isn't new, but is a lot more pertinent in a market where sellers know the chances of their home not selling at all is high - it's not like a few years ago where sellers would be happy to sit on the market, knowing they would be spoilt for choice with buyers.
Just because you need a mortgage doesn't mean you can't make a cash offer.
If you're a first home buyer, or have already sold your own home, you can make an unconditional offer once the bank has confirmed they're happy with the property. This means investing up-front in getting all of your checks done, like a LIM report or a building inspection report, which come at a cost, but can put you in a far more powerful position than offering with conditions.
Many clients of mine have made enquiries about seeking finance to buy a new home, subject to the sale of their own home. This is absolutely doable, but in my opinion puts you in the weakest position as a buyer. There's a chance your home won't sell for what you expect, or that it could take longer to sell than you thought, and from a vendor's position your offer could drag on for months and still end up with no 'sold' sign. Selling your own home first, with an extended settlement where possible, gives you the ability to act as a cash buyer with a chunky period of time to secure your next home. Of course, the risk is that you can't find something suitable, but realistically looking at the market, you're spoilt for choice at the moment, so finding your next home shouldn't prove too much of a challenge.
The old saying 'cash is king' couldn't be more true in today's market, so make the most of your power - you can be fairly certain the other buyers you're competing with won't be in the same strong position as you!
Note this article is not intended as personalised advice, and should not be acted upon without seeking independent personalised financial advice.
