Buying in Western Sydney – A Buyers Agents Story

A couple in Sydney’s west was seeking advice to acquire a family home. They had liked two other properties but failed to acquire them. Typically, they were beaten in negotiations, the agents were not good at getting back to them and they felt the whole process was not transparent. Finally, they had located a property they liked, made an offer and paid the deposit and signed a contract.

They realised on further inspection of the property there were some water and mould issues with the house. This was unacceptable. The couple withdrew from the purchase during the cool-off period and subsequently lost a portion of their deposit (several thousand dollars). They were happy with their decision to get out of the purchase yet upset with losing their funds but also had to face the reality of continuing their weekend searches.

They had a child with special needs that needed to be near a specific school in the Northwest of Sydney. They needed easy access to the school and to be close to major arterial roads so one of the couple, a Vet on the Northern Beaches could easily access major roads for a faster trip to the Northern Beaches and a faster trip home… despite living out West.

The other partner worked from home and required adequate space to work from home and not be too interrupted by their 2 young children or other family distractions. They required a home with 3 bedrooms, 1 bathroom, 2 car spaces, a good home working area, and outdoor space. It had to be a safe area and a good location for the children.

To exacerbate their situation one of the couples was just completing maternity leave and returning to work, their current lease was due to expire, and their finance approval had 60 days left to go. They had only a 5% deposit.

Their target regions to get a property were quite wide incorporating several suburbs across sever different local government areas. Their specific needs were very focused, while their preferred suburbs were fluid as long as they met travel and schooling requirements. They needed to find, decide, and settle a property by June.

In a discovery call with them, they were uncertain as to whether the Buyer’s Agent service had any value to them. They had owned and transacted property before and now they were actively looking again. Understanding the value proposition of property in their selection choice was a key consideration for this couple and most buyers… one each occasion they were not sure of how accurate their pricing was. However, understanding the value is only one of many considerations in purchasing a property.

Due Diligence is also key. I had the couple complete a simple process of separately writing down the top three things they must have in a property and the bottom three that were not negotiable. For every property they looked at I would ask them to rate it out of ten. This process is to get the couple congruent and understand each other’s value system when it comes to property. This preparation makes decisions easier.

There are 3 key areas where people generally tend to fail in the property acquisition process.

Firstly, having no time. In this case, we had 2 professionals with young children, and a lot going on. Did they think they could give the right effort to finding the right property? Did they have the time to push the transaction and chase lawyers and agents while they were working and juggling children? Did they want to keep going to open home inspections with the kids?

Secondly, how would they know the real value of the property aside from what the agent is quoting them? Then if they had the value identified, was it good value against other comparable properties and opportunities. Were there any other alternate properties that could be brought into the mix off the market? Was the value right for that point in time in the market, in that suburb and on that street?

Thirdly, is the execution process… and perhaps one of the largest considerations. Did they have the ability to negotiate effectively against the agents? Can they do the due diligence properly to make sure they minimise the risks? (they failed once at this), What about a sound strategy to acquire the property? What about handling the to and fro with lawyers and agents? The contract questions and the scenarios that get thrown up – can they get another opinion, or can someone independently review the contract for other things that may not be favourable? What about navigating finance and knowing when to move with conditional finance approvals? What about constructing the offers and bids in a fashion to get the best price? Did they have the knowledge and experience to match the professional sales agents and converse with other parties (Councils, lawyers, pest and building control)

They realised that they had failed previously in their execution when they had paid a deposit before doing the right due diligence. They also realised that they did not have the confidence in the prices they are offering… were they paying too much or too little, were they competitive or would they be beaten. Would their budget let them down?

By the time our call was finished they realised they had failed on the time issue, and value issue and didn’t have the skillset or strategy to get the result in the transaction. All three major areas were not properly understood and managed.

A Buyers Agent provides risk mitigation, I assured them I would never let them get into a position to lose their deposit again. I had formulated a buying strategy along with scripts for them to utilise in the process. We were operating as a team with the result being to acquire their family home.

The elephant in the room is always the cost of using a Buyer’s Agent. My conversation revolves more around “you can’t afford to use one”. I always state that I will earn my fee in the first round of negotiations. Negotiating to my defined Fair Value versus what the Agents are stating. Fair value is thoroughly researched and can be a moving figure based on desktop assessments versus physical inspections.

In the case of Auctions, if you had the last bid, a counterparty will have another bid and then you have to beat their bid to be in the front running. This cycle could cost you $30k or more as you try to be the final bidder. If a Buyer’s Agent can slow the auction and reduce bidding increments or better still negotiate before the auction, then this risk is eliminated – your fee is more than covered. They quickly realised that they did not have auction experience and tenacity to dominate the room, slow momentum or psychologically impact the other auction buyers

The issue is that clients don’t know what they don’t know– it is only when they have been through this process, that they understand the savings and security you can provide. How do you get around this dilemma? Other clients speaking to this issue (social proof), or in my case, I provide a compelling Strategy Sheet within 24 hours of identifying ‘the right property’ This sheet covers all the players in the transaction, the price points they are operating to and importantly my Fair Value price guide…. I always negotiate around my Fair Value for the property.

The Strategy sheet leaves no doubt in the client’s mind as to where we are in the process. There are no surprises, and they are impressed by the accuracy of the Fair Value estimates, the knowledge and skillset around understanding the psychology of the buyers, agents, vendors and the solicitors… and then there is the asset itself. They are all stakeholders and every property and transaction is different. It is like a GPS route on the way to their destination.

In this case, I had crawled under the house and identified water flows that moved under the house. These are great negotiating points. Understanding where the water comes from and how to divert it is the other component. Agents don’t like you crawling under houses – I always do. You can easily see termite activity in wood piles stored and flows of water around the foundations, and with experience, you can identify where the water is entering. My observations are always typically supported by findings in a Pest and Building Report. There are set costs for renovating kitchens and bathrooms that can be adhered to as a rule of thumb particularly if the property is a little tired and needs renovation. Roof leaks are another key area. These concerns are all footholds to leverage negotiations.

Guess what? – Often the house owner knows these problems and is hoping they will be overlooked. Subconsciously they start acknowledging their property is not perfect. Restating the problems, and estimated costs of remediation and renovation are all factors that impact price. Often the owners know this but want to capitalise on a sale without having to do these works. I am always preparing to condition the agent and owners before I start negotiating.

It is all about the client so when one of the purchasers found a house that she loved we shifted the brief from Full Service to Negotiation. The Selling agent represents the Vendor’s best interest and the Buyer’s Agent represents the Purchaser… the line in the sand is clear.

I spend a lot of time reviewing contracts, pest and building reports and understanding their finance and approvals. I am always pushing their legal representatives to provide a 66W (no cool-off period) allowing me to make unconditional offers. This must be approved by their legal team. This then allows me to make ‘frictionless’ offers where the only consideration is the price offered. The agents and vendors are confident we will perform.

Most sales agents prefer transacting through the Buyers Agents because the process becomes fast, professional and seamless. Many do not like the fact they are held more accountable on price and process but at the end of the day, there is very strong legislation around how the Agents perform. The clients are ready to perform. Many deals are lost or won from the Agent and Vendors not having confidence in the purchaser’s ability to perform.

In this Kings Langley case, I was able to finalise how their funding and price offering would look. I had established the competition and the next step was executing with speed and efficiency. The first offer was to target a level to see if I could engage the agent in price discussion. The agent was confident of $1.4 Million, my first offer was at $1,202,500 – which was quickly rejected. I then moulded our terms to match the vendor’s settlement requirement and offered $1,209,500. We were in a Dutch auction with another buyer, but I had set the pace. The agent was now becoming more transparent and started to work with us. My final offer at $1,212,000 with a Close of Business deadline. The deal was done we had an offer and acceptance. The agent confided they were originally at $1.5M but had to reduce the price.

The secret sauce was that I ran my negotiations parallel with my client making the same inquiries. Only declaring my confidential client at the time of acceptance. The exit of my client at the right moment destabilised the agent and the owners’ expectations. They became uncertain, I was able to capitalise on this. Declaring the real position at the appropriate time is an art form and can lead to major hostility with agents if not performed correctly. Most will have the utmost respect for the strategy. At the end of the day, they get a sale, and it is only their pride and ego that have been bruised.

For my clients they had control in a fast market, they had professional guidance and execution. Their time was used effectively, the value of the property was well understood, and the execution of the strategy was highly effective. The result was that in a matter of days the transaction was concluded… only because the preparation and groundwork were done beforehand.

The client was ecstatic – they got their house cheaper and now had surplus funds to complete a renovation before moving in. Was the use of Buyers Agent good Value? You be the judge.

Snapshot:

Agent wanted $1,400,000

Fair Value $1,225,000 (Purchased better than Fair Value 😊)

Bought $1,212,000 (Saving $188,000 to Agents asking & $13,000 under my Fair Value)