Blog - Cooper & Co

When you’re looking for a new home, one of the first things you need to consider is the order of events – do you sell your existing property before you buy, or after? Here are some factors to consider before taking the plunge.

Buyer’s market or seller’s market?
When buyers are plentiful, but properties aren’t, homes generally sell quickly. In a seller’s market, there is less risk associated with buying first and then selling your existing home. However, sellers in this kind of market may be less likely to accept an offer that is conditional upon you selling your home, so you could end up owning two properties for a period of time.

The average time it takes to sell a property varies from region to region and from month to month, so it’s important to talk to your sales consultant to get advice about current market conditions, recent comparable sales in your area and the possible demand for your property before making a decision to buy first.

Keep in mind also that in a seller’s market there will be more competition, so you can expect to pay top dollar your new home.
The good news is that you’ll have the peace of mind that comes from finding the right house to buy before selling yours.

Do you know how much you can spend on your next property?
Until you sell your property, you may not know exactly how much you’ll have to spend on your next one. In a buoyant market, you could easily have unrealistic expectations when it comes to the value of your own property. Your sales consultant can help you get a realistic picture of your property value by preparing a comparative market analysis of what similar properties have sold for in your area in recent times.

Are you a cash buyer?
If you choose to sell first, you will instantly become a cash buyer and be in a much stronger position to buy as soon as you find what you want. Do your homework on the market and area that you are looking to buy in so you’re ready to buy when the right property comes up.

Have you found your dream home?
Buying a new home is an emotional decision. If you want to follow your heart and buy that dream home before selling your current home, make sure you’re well informed. A good sales consultant will provide quality advice for your unique situation. If you are looking for a very specific type of property and it becomes available, it could be a good move to snap it up even if you haven’t sold your home, but there’s
no downside in getting expert advice before you do.

Are property prices are going up?
If you’re in a rising market, it could make sense to buy your new home first and negotiate a longer settlement. Your current property could potentially rise in value during the settlement period, allowing you to earn more when you sell it.

Are property prices falling?
Falling property prices can work in your favour as well if you can attract an interested buyer before prices drop further, leaving you free to purchase your new property at the lower end of the market cycle. However, falling property prices are also an indication of a slower market so it could take you longer to sell your existing property.

At the end of the day, your best course of action is to work with a real estate professional who can provide you with the local knowledge and insights you need to make an informed decision for your specific circumstances.

Bidding at auction: Tips and tricks from a champion auctioneer

For the uninitiated, bidding at auction can be nerve-wracking. Here are some strategies from Aaron Davis of Harcourts, winner of the 2019 Real Estate Institute of New Zealand (REINZ) National Real Estate Auctioneering Championships, that could give you an edge over your competition.

Work out the number you’re prepared to go to but avoid round numbers.
Most buyers stop at round numbers like $550,000, so make yours $553,000. That little bit more can often make the difference between coming out on top or missing out on a property at auction.

When the auctioneer calls for opening bids, be confident and assertive.
Throw out an opening bid and when another buyer comes back with a counter bid, don’t be afraid to respond with your next bid quickly and decisively. This gives the impression that you’ve got the funds and that you’re there to buy the property no matter what, which can discourage other buyers.

Call out bids that are higher or lower than what the auctioneer is suggesting.
Don’t be afraid to mix up the increments and bid in unusual increments like 36 instead of the usual 5s and 10s. Double bidding on top of yourself, which is when you already hold the highest bid and then bid again, can also throw other buyers off.

Sit or stand in a location where you can observe the other buyers in the room.
You’ll pick up important visual cues; facial expressions, signals between partners, even body language can give you a good indication of when your competition has reached their limit.

Don’t wait for the trial close to make your next bid.
When the auctioneer calls once, twice, third and final call, it triggers someone to bid. The trick, says Aaron, is not to wait for the trial close but to keep on bidding in random increments to discourage other bidders. If you hit your ceiling, you’re done.

As a seller, the results you get on auction day will depend on many factors, including the skill of your auctioneer. “The quality of the auctioneering can have an enormous impact on the outcome of an auction,” says Harcourts Managing Director, Bryan Thomson, “so it’s a testament to the expertise of our auctioneers that they continue to win the top awards at the national championships year after year.”

The insiders guide to buying or selling Real Estate

Whether you love the thrill of an auction or your knees tremble at the thought, auctions have become the preferred method of selling property in most of the major centres across the country. For those who are new to the process, buying or selling at auction can appear daunting. Don’t be put off! There are many advantages, and a few tips and tricks, that you should know about before entering the auction room.

The advantages of auctions for the seller:
As a seller, an auction offers you the opportunity to achieve the best price in the marketplace in the shortest possible time. Here are some of the many reasons why selling at auction has become so popular:

  • Marketing without a fixed price increases the number of cash-in-hand buyers who will look at your property.
  • Buyers come to an auction with their maximum price in mind as opposed to focussing on how low they can negotiate the price down to.
  • Auctions allow buyers to determine the value of the property rather than relying on a sales consultant or a valuer, which can potentially result in a price that is too low and leaves money on the table, or too high and the property remains on the market for an extended period of time.
  • Auctions attract the best buyers in the market, the ones that are cashed up and ready to purchase on the day without imposing any conditions on the seller. A third of all conditional contracts fail to result in a sale which can be discouraging.
  • Conditional buyers are not excluded from auction. If the seller doesn’t get a suitable figure at auction, there is still the opportunity to have a conversation with conditional buyers afterwards.

What to expect when you sell at auction
Your sales consultant will guide you through the pre-auction and auction process which should include:

  • Informing you about what is happening in the market, specifically around your area and in regard to properties that are similar to yours.
  • Taking you through every element of the marketing plan, from the images and text for the advertising through to the scheduling of open homes.
  • Keeping you informed with daily updates and weekly face-to-face meetings.
  • Providing you with a written report on the marketing campaign and interest from prospective buyers.
  • Helping you set a realistic reserve price.

Remember, you’re in control as the seller. You set the reserve. If bidding does not meet the reserve, you can decide if you want to enter negotiations.

Getting prepared to buy at auction

A common perception is that auctions are good for sellers, not buyers, but this is not the case. As a buyer, you know exactly who your competition is and the negotiations are out in the open for everyone to see. If your bid is successful, the contract is signed then and there, and property is yours with no further negotiations.

To make the auction process work for you, it’s important to arrive with your homework done. Here are some suggestions on how to prepare to buy at auction:

  • Have your finances organised prior to the auction date so you know exactly what you can afford to bid. If you’re successful on the day, you’ll be asked to sign the sales agreement and pay a deposit, which is typically 10% of the purchase price.
  • Organise a building inspection of the property you’re bidding on and have your solicitor review the property title and all legal matters related to the prospective purchase.• Review the auction documents beforehand.
  • Research the local market so you can accurately assess the market value of the property. You may also wish to obtain an independent property valuation.
  • If you’re new to the auction process, attend a few auctions to see what goes on before attending the one for the property you’re interested in

A buyer can submit a pre-auction offer to the property owner for their consideration. If they are willing to accept the offer, the auction date may be brought forward.

It’s important to let the sales consultant know you are interested in the property so if another purchaser submits a pre-auction offer and the auction is moved forward, you’ll be contacted. The reserve is set at the offer figure and the auction starts with that as the opening bid.

If no higher bids are received, the property is sold at the offered price, but if other buyers bid, the property will be sold to the highest bidder.

Regardless of whether you’re a buyer or seller, the more research and preparation you do prior to auction, the more likely you are to put your best foot forward on auction day

Building wealth through property investment

Owning property is an excellent way to build wealth. Historically, property has been a less volatile investment with real estate values invariably tracking upwards over time. What’s more, you have the added benefit of being able to “leverage” your existing real estate investment to buy an investment property using borrowed money and grow your property portfolio even further.

Using equity to grow your investment portfolio
How much equity do you have in your home or investment property?  Enough to fund your next property purchase and grow your investment portfolio?

If you’ve owned your property for some time and provided you have the means to service a mortgage, you may be able to access the equity in your property to fund the purchase of your next property. Equity is the difference between your property’s value and the amount you still owe on your mortgage. It’s essentially the bit you “own” of the property and it can be used as a deposit to buy another property.

If you’re buying a residential investment property or you’re using a residential investment property you already own as security for a new loan, you’ll generally need at least a 30 per cent deposit. Instead of having to save up the cash for the deposit though, you could use the equity in your existing property to purchase another property.

Calculating the equity in your property
To calculate how much equity you have, you’ll need to know the market value of your property. You can use the valuation on QV or get a registered valuation of the property to determine its market value. You’ll also need to know how much you still owe on any lending secured by the property, which you can obtain from your lender.

Lenders will determine how much you are able to borrow by looking at a combination of your equity and income. Different lenders will have different lending policies and the combination of equity and income may vary from lender to lender.

Your potential rental income from the investment property you’re planning to buy will be included in the lender’s servicing calculations when determining your borrowing capacity. Contact a Harcourts’ Property Manager to arrange a rental appraisal to help you  determine the likely rental income from the property.

You’re required to have at least 20 per cent of equity in your existing property after new lending is taken out if you’re using the equity in your family home, or 30 per cent equity if using your existing investment property. That means you could borrow up to 80 per cent of the value of your family home and 70 per cent on any investment properties you own, based on current loan to value restrictions.

If you’d like to find out more about accessing the equity in your property and unlocking your opportunities to grow wealth through property investment, contact Mortgage Express and one of our advisers will get back to you within 24 hours. A Disclosure Statement is available on request and is free of charge.