As a buyer, has it been frustrating trying to negotiate your deal for a resale property? There are many challenges in the whole process, some of which are unique to the market today!
Today, we go through what buyers ought to be informed of, to aid in their process of purchasing a resale property!
Challenges
In the resale market today, buyers face challenges in many forms. These essentially come in the form of bidding wars, facing high quoted prices, and tough negotiations. The high prices in today's market make it a challenging one for buyers to navigate.
Thus, the first step to take is to understand the market and its inherent characteristics.
Market Summary
In the HDB market today, demand is high and supply is low. This naturally leads to high prices with many units having COV (Cash Over Valuation). For those without COV, value is also high as they are mostly young units. In private property, that's also true.
However, there is also no 'right or wrong' way to purchase properties based off price alone. Other factors that come into the decision are usually personal. Everyone buys a property for a different personal reason and preference, thus it's important to tailor it to yourself when negotiating a deal.
Workings of a deal
In the workings of a deal, the negotiations form the basis before any offer or deal closure. To start with, buyers or buyer agents would contact the seller agent of any property listing. Thereafter, the seller agent has the responsibility of qualifying buyers by understanding their readiness, budget and price expectations.
At this stage, buyers tend to ask what's the 'closing price' of the unit. This is a loaded question that buyers want answered to try to avoid bidding wars. For sellers in today's market, where buyers galore, the answer is 'the highest bid'. By having a 'closing price', sellers are just limiting themselves in this 'high' market where everyone is trying to get the best price.
It's important to understand that not every listing has a price to close, and it's important to understand the competition in the area, how good the property is (and thus its demand), and have an accurate prediction of the prices that buyers are willing to pay.
Willingness to pay
Talking about the willingness to pay, everyone wants to get a good unit, at a good price. However, the concept of a good price differs for everyone. Today, when an advert is put up, there can easily be 20-30 calls within 24hours asking for viewings. Many good properties are out there with keen competition and high interest. For properties with no competition or low demand, it probably means the area is not attractive to the majority of people.
If you are entering the market today, recognise that a bidding war is unavoidable. Buyers can afford to and will put in high bids. Thus, it's vital to know your own level of 'willingness to pay'.
Start by understanding the property potential in the area you are interested in. By understanding the supply and demand, it's easier to gauge the correct price level in the area. Compare this price level to your own willingness to pay, if you are unwilling to put in bids at the price level required, you are unable to enter the market in this area.
Essentially, by also understanding the seller's perspective, buyers will be able to realistically gauge the premium required to successfully purchase their resale property.
Tips in the process
The key things in the resale purchase process are to understand the properties in the area you are looking at, understand the correct pricing.
Also, deeply consider if you really 'NEED' to purchase a property in the specific area in today's market. The current situation of high demand and low supply creates ever higher prices. In such a market trend, there are certain strategies and negotiation techniques that would run different from other times of the market. By recognising the state the market is in, you need to ask yourself if you are ready to step into the market today!
Conclusion
By understand the market situation, we see high prices and high bids as the norm. There will be competition for good properties and bidding wars are par for the course as a buyer. One would need to recognise your own willingness to pay and prepare a high enough budget in order to compete in the current market.
Watch as Aaron dissects the resale purchase process and shares his experiences and thoughts on the current market climate!